 "electric cars, EV, electric vehicle")
VinFast, the Vietnamese electric vehicle manufacturer, has unveiled an ambitious plan for launching its operations in India and has inked a memorandum of understanding (MoU) with the Tamil Nadu government to set up an integrated electrical vehicle plant in the state.
In a SEC filing in the US, VinFast has now stated that it will make an initial investment of $200 million to set up a plant in Tamil Nadu for completely knocked-down (CKD) assembly of electric vehicles with a capacity of 50,000 vehicles per annum.
The money for the plant will come from the planned optimisation of its capital expenditure in 2024 and 2025, which will help save over $400 million of cash. The company expects to have the India factory up and running by 2026.
It also hopes to cash in on the incentives offered by the government for the manufacturing of electric vehicles in India, some relief from tariffs and taxes, and access raw materials at attractive rates. Its long term objective is to invest a total of $2 billion in the country in an integrated EV plant with a capacity of 150,000 vehicles per annum, including a battery plant.
The Indian market could be attractive for VinFast if it can offer affordable electric vehicles with ensured quality. Analysts say that the VF3, a 3.1-metre- long mini electric compact car which has already been showcased, could be the answer.
Experts say that the VF3 could be priced between $15,000 and $20,000 which could work for India. The model is expected to be launched in Q3 of 2024.
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Meanwhile, VinFast, which is owned by the Vingroup, one amongst the largest business groups in Vietnam, is facing serious challenges in its aggressive ambition to be a global player.
Though it had targeted to sell 50,000 electric vehicles in CY23, nearly double of its sales of the previous year, is well behind that goal. According to data, VinFast has sold only 21,342 vehicles in the first three quarters of last year. And even these numbers have been shored up by related party transactions within the group, with a large number of vehicles being sold to its group taxi company with which it has a contract to sell 30,000 electric vehicles.
Based on data available between January-November last year the total car sales of domestic brands in Vietnam was at 360,000 vehicles. The market has shrunk by 29 per cent year-on-year.
In 2022, when the Vietnam EV market was in a few thousands, VinFast grabbed 50 per cent of the market share, with the rest coming from Chinese car makers, many of them with products that were half its price.
VinFast’s first big bet has been in the US, where it is facing serious challenges in its effort to break in. This despite the company’s listing in September last year through a special purpose acquisition company (SPAC) and hitting a record market cap of $82 billion. In fact, it overtook the market caps of Ford and General Motors briefly only to tumble dramatically and is now at a market cap of $16.41 billion.
The company jumped into the US market with a $ 4 billion investment to set up a factory in North Carolina with a capacity of 150,000 vehicles. But the date of operation has been extended by a year to 2025. So VinFast has no choice but to import the EVs from Vietnam and hence cannot avail of the attractive subsidies in the US for EVs. This has squeezed its margins and forced it into losses.
What’s worse is that the first batch of its electric cars shipped to the US last year had to be recalled due to software issues.
That the company is making losses is understandable in this business (its losses are $623 million, nearly double that of its revenues). At this point it is being bailed out by the Vingroup, which last year agreed to provide loans of $2.5 billion. A part of the loan has already been disbursed.
