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Challenges and Developments in VinFast's Electric Vehicle Market

GOOVER DAILY REPORT June 21, 2024
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TABLE OF CONTENTS

  1. Summary
  2. VinFast's Domestic Market Challenges
  3. Global Expansion Initiatives
  4. Recent Product Launches and Pre-Orders
  5. Financial Insights and Leadership Changes
  6. Company Background and Future Outlook
  7. Conclusion

1. Summary

  • The report focuses on the challenges and developments faced by VinFast, Vietnam's premier electric vehicle manufacturer. Despite having substantial brand recognition and ambitious global expansion plans, VinFast faces significant challenges in its domestic market, such as quality issues and an underdeveloped charging infrastructure. The report also highlights VinFast’s impressive pre-order numbers for its VF 3 mini e-SUV and its strategic global market expansion into the United States, Europe, and Canada. Additionally, financial aspects, leadership changes, and recent product launches are discussed to provide a comprehensive overview of VinFast's current state and progress.

2. VinFast's Domestic Market Challenges

  • 2-1. Brand recognition and consumer trust issues

  • VinFast has enormous brand recognition in Vietnam, largely due to its backing by Vingroup, Vietnam's largest conglomerate. Despite this, the company faces significant challenges in engendering consumer trust and convincing drivers that its electric vehicles (EVs) are reliable and of high quality. These trust issues are highlighted by the example of Ngo Trong Tu, a 31-year-old businessman from Hanoi, who opted to purchase an imported petrol-powered Honda instead of a VinFast EV due to concerns over the reliability and quality of the latter.

  • 2-2. Quality and software complaints

  • VinFast's electric vehicles have been the subject of numerous complaints related to faulty construction and software problems. This has been compounded by several high-profile incidents: the presenter of the 'Xe Dien EV' YouTube channel reported multiple issues with his VinFast VF8, including a faulty battery, non-functional smart key, problems with the virtual assistant, the accelerator, and the air conditioner. Additionally, a VinFast EV caught fire in Nghe An province, an incident which the company claims was not due to a vehicle defect. Despite VinFast's assurances that issues are promptly addressed, these complaints have severely impacted consumer perception.

  • 2-3. Underdeveloped charging infrastructure

  • One of the major hurdles for VinFast in its domestic market is the underdeveloped EV charging infrastructure in Vietnam. The limited number of charging stations makes it challenging for consumers to consider electric vehicles as a viable option. This infrastructure gap not only affects the convenience of owning an EV but also exacerbates existing consumer doubts about vehicle reliability and practicality.

  • 2-4. Comparison with imported petrol-powered cars

  • Vietnamese consumers tend to show a preference for imported petrol-powered cars over VinFast's electric vehicles, as illustrated by the purchasing decision of Ngo Trong Tu. Despite the significant governmental encouragement to buy locally produced products, consumers have more faith in foreign brands. In 2022, out of approximately 280,000 new passenger vehicles sold in Vietnam, VinFast managed to sell only 7,400 units. Even in 2023, a considerable portion of VinFast's sales were attributed to a taxi company owned by its parent Vingroup, indicating poor market penetration among general consumers.

3. Global Expansion Initiatives

  • 3-1. Plans to Enter the US and European Markets

  • VinFast, Vietnam's leading electric vehicle manufacturer, has announced plans to expand into key international markets, including the United States and Europe. According to the referenced documents, the company's focus on these regions is a strategic move to tap into markets with robust EV adoption policies. This expansion comes after a successful debut at the 2018 Paris Motor Show and the introduction of their first three car models in 2019. VinFast intends to introduce its VF 8 and VF 9 models to these markets by the end of 2022. Furthermore, the company has received permission to test autonomous driving capabilities in California, enhancing its appeal to tech-savvy consumers in the US.

  • 3-2. Expansion into the Canadian Market

  • VinFast Auto Canada, a subsidiary of Vingroup, is making headway in the Canadian market. The company has chosen Canada as one of the five key jurisdictions for its global EV launch, leveraging the country's EV-friendly policies. The Canadian operations will be based in Burnaby, British Columbia. VinFast plans to roll out retail and aftersales facilities rapidly over the next 12 months. The company's VF e34 model, already available for preorder, has garnered 25,000 domestic orders, highlighting strong consumer interest.

  • 3-3. Showroom Openings and Global Strategies

  • VinFast is actively setting up showrooms in North America and Europe to establish a foothold in these markets. According to the documents, new vehicle models, including the VF e35 and VF e36, are expected to be displayed in these showrooms. The company aims to have a significant presence at major automotive events such as the CES, New York International Auto Show, and the Los Angeles Auto Show. These efforts are part of a broader strategy to boost visibility and consumer trust in new markets.

  • 3-4. Autonomous Driving and Future Model Launches

  • VinFast is investing in autonomous driving technologies, with research and development centers in San Francisco, Australia, and Vietnam. The company is working on a fleet of vehicles with various levels of autonomous driving capabilities. Testing is already underway in California, and VinFast plans to offer two out of its three models with autonomous features by 2022. This technological advancement is a crucial part of VinFast's strategy to differentiate itself in the competitive EV market.

4. Recent Product Launches and Pre-Orders

  • 4-1. VF 3 mini e-SUV and Early Deposit Incentives

  • VinFast started accepting deposits for the VF 3 mini e-SUV in Vietnam from May 13 to May 15, 2024. The introductory price during this period was set at approximately $9,248 without a battery and $12,390 with a battery. After the initial 72 hours, the prices increased slightly to approximately $9,445 and $12,670, respectively. Customers could opt for a flexible battery subscription plan with monthly costs ranging from approximately $35 to $78 depending on usage. VinFast also offered a complimentary high-end exterior color upgrade for early depositors, valued at approximately $314. The VF 3 boasts impressive dimensions and features, including a 10-inch touchscreen entertainment system and a range of up to 210 km on a single charge.

  • 4-2. Record-Breaking Pre-Orders for VF 3

  • VinFast received 27,649 non-refundable and non-transferable pre-orders for the VF 3 mini-SUV within 66 hours of opening deposits, setting a new record in the Vietnamese automotive market. The high number of pre-orders is attributed to the special introductory pricing and the innovative sales approach, which included selling vehicles on e-commerce platforms and through livestream sessions by influencers. This strategy led to over 50% of orders being placed online.

  • 4-3. Sales Strategies Including Online Deposits and Financing Options

  • VinFast implemented various sales strategies for the VF 3, including accepting online deposits through platforms like Shopee and VinID as well as via showrooms and authorized dealers. The company also introduced financing options allowing customers to pay a down payment of approximately $1,965 to $2,750 and finance the remaining balance with monthly payments of about $78.5 over 8 years. This financing plan made the VF 3 more accessible to a broader range of customers.

5. Financial Insights and Leadership Changes

  • 5-1. Financial losses and need for sustainable plans

  • VinFast has experienced significant financial losses. The share price decreased by 74% from $23 billion in August 2023 to $6 billion in April 2024. Additionally, Pham Nhat Vuong, the chairman of Vingroup, has announced a $1 billion personal injection into VinFast to help stabilize the company and support its future. The need for sustainable financial plans is evident to ensure long-term stability.

  • 5-2. IPO and market value changes

  • VinFast completed a $23 billion SPAC IPO merger with Hong Kong Black Spade Acquisition Co on the Nasdaq in August 2023. The company's market value initially reached $74.5 billion by the end of the first trading week. However, as of January 2024, the market value was noted to be $16.3 billion. These fluctuations underline the importance of maintaining investor confidence and managing market expectations.

  • 5-3. Leadership roles and investments

  • In January 2024, Pham Nhat Vuong was appointed CEO of VinFast, swapping roles with Le Thi Thu Thuy, who became the Chairwoman. This leadership change aims to strengthen VinFast's strategic direction. Additionally, investment from Vingroup and Pham Nhat Vuong underscores the commitment to bolster VinFast's market position.

6. Company Background and Future Outlook

  • 6-1. Historical development and rapid growth

  • VinFast is a member of Vingroup, which is the largest private corporation in Vietnam with a strong presence in technology, real estate development, retail, and services. VinFast was established in 2017 with a state-of-the-art automotive manufacturing complex in Hai Phong, Vietnam. The company debuted at the 2018 Paris Motor Show and launched its first three cars in 2019: the Lux A2.0 sedan, Lux S2.0 SUV, and the Fadil for city commutes. In just a year, VinFast became a leading car manufacturer in Vietnam across multiple segments.

  • 6-2. Focus on transitioning to electric vehicles

  • From 2021, VinFast expanded its product profiles by introducing e-scooters and Vietnam’s first electric bus, the e-Bus. In 2023, VinFast decided to focus entirely on electric vehicles, ceasing the production of gas-powered cars at the end of 2022. The first electric consumer vehicle produced in Vietnam by VinFast was also launched, aimed at both the global and domestic markets.

  • 6-3. Expansion in product profiles

  • VinFast has a diverse lineup that includes entry-level models like the VF 5, which is affordable and targeted at first-time car buyers, to luxury models like the VF 9, aimed at VIPs and politicians. The company also produces electric two-wheelers and buses. Notably, VinFast launched the VF 8 and VF 9 for the global market in Europe and North America by the end of 2022, and has made a significant impact by showcasing their EVs at major shows like CES, the New York International Auto Show, and the Los Angeles Auto Show.

7. Conclusion

  • VinFast's journey as a pioneer in the electric vehicle market of Vietnam shows remarkable promise, especially with ambitious global expansion plans into markets like the US, Europe, and Canada. Despite impressive strides, the company continues to grapple with quality issues and consumer trust problems domestically, which signal the need for a robust strategy to overcome these hurdles. Financial stability remains a critical focus, highlighted by the fluctuating market value and substantial investments from Pham Nhat Vuong. While the VF 3 mini e-SUV's record-breaking pre-order numbers reflect strong market potential, addressing the domestic challenges, such as improving product quality and expanding charging infrastructure, is essential for sustainable growth. Moving forward, VinFast’s focus on advanced technologies like autonomous driving and a diverse product lineup positions it well for future success. However, creating a balanced approach that enhances domestic confidence while leveraging global opportunities will be crucial.

8. Glossary

  • 8-1. VinFast [Company]

  • VinFast, part of Vingroup, is Vietnam's leading electric vehicle manufacturer. Founded in 2017, it aims to become a global EV leader, overcoming domestic challenges while expanding internationally. Key products include the VF e34, VF e35, and VF e36, alongside a push into autonomous driving technologies.

  • 8-2. Pham Nhat Vuong [Person]

  • Vingroup Chairman and CEO of VinFast, Pham Nhat Vuong, has been instrumental in VinFast's growth. His leadership and substantial personal investment highlight his commitment to establishing VinFast as a significant player in the global EV market.

  • 8-3. VF 3 [Product]

  • The VF 3 mini e-SUV is one of VinFast's latest offerings. It received a record-breaking number of pre-orders, reflecting its potential success. With affordable pricing and flexible financing options, the VF 3 aims to strengthen VinFast's presence in the electric SUV market.

9. Source Documents