Vietnam carmaker wants to take on Tesla – 7/5/2023 – Market

Speed ​​is of the essence at VinFast, the upstart automaker that hopes to become Vietnam’s answer to Tesla.

The company was founded just six years ago, when its factory site, two hours from Hanoi, was a swamp. Now VinFast says it is capable of producing 250,000 vehicles a year as it tries to break into the US market and is expected to debut on the New York Stock Exchange this month.

“The pace that VinFast applies to the business is from another world, the name says it all”, says Luis Gustavo Lemes Pereira, a 35-year-old Brazilian engineer who has worked for companies such as Chery and General Motors, while showing visitors the production line company’s electric vehicles.

The ambitions of this fledgling automaker, from a country with a limited manufacturing history and a relatively small consumer market, underscore how the rapid global shift to electric vehicles is spurring new names to take on brands that have dominated the sector for decades. VinFast is trying to follow in the footsteps of Chinese brands such as BYD, backed by Warren Buffett, which in just a few years has become the world’s biggest maker of electric vehicles or plug-in hybrids – surpassing even Tesla, the industry’s biggest disruptor. .

“We think the electric vehicle market is wide open,” VinFast chief executive Le Thi Thu Thuy told the FT from her office in Hanoi. “The whole world is moving towards EVs (…) we are not competing for a shrinking market share.”

Last year, just three years after selling its first gas-powered model, VinFast stopped developing those cars to focus on electric vehicles.

A senior industry executive who worked directly with VinFast said the company, founded by Vietnam’s wealthiest businessman and well connected in politics, was making “a move on an international scale, backed by … the government [vietnamita]”.

While there’s no shortage of big growth plans for VinFast in the US — it has a network of gleaming showrooms in California and plans to build a factory in North Carolina — its ambitions have faced a reality check.

A first shipment of 999 cars that arrived in the United States last December received mixed reviews: The flagship VF 8 model “proves that building cars is hard,” said Car & Driver magazine. In May, the first cars shipped were recalled after the US National Highway Traffic Safety Administration warned that a software error in the dashboard display prevented critical safety information from being displayed and “could increase the risk of a crash”.

Meanwhile, plans for a $23 billion NYSE IPO had to be scaled back. VinFast will now list through a merger with a special purpose acquisition company on the US stock exchange, without raising any outside cash. Instead, founder Pham Nhat Vuong, who controls the Vingroup conglomerate, is investing an additional $2.5 billion upfront, and VinFast shareholders will retain 99% of the shares.

VinFast’s net losses for the first quarter were VND 14,120.8 billion (US$598.3 million) versus VND 9,660 billion in the prior-year quarter.

Thuy blamed difficult international market conditions for the change in IPO plans.

“Over the last 18 months or two years we’ve been working on a traditional IPO, we were pretty much ready to deliver [mas] the international market, especially the IPO market, wasn’t ready, the window didn’t really open,” she said.

“I think we anticipate that within 18 to 24 months the capital markets will be back to normal and VinFast will be able to raise funds on its own.”

In the meantime, she said, “Vingroup and our president will always support VinFast. Whatever VinFast needs, Vingroup always supports it.”

A banker who works for the company said the onslaught of bad news had tarnished the brand’s luster, making it “increasingly difficult to sell the VinFast story to US investors.”

Potential shareholders have raised issues, including “the quality of the vehicles” and the speed with which the company is trying to launch itself in the United States, the banker said.

Industry expert Tu Le, founder of automotive consultancy and market research firm Sino Auto Insights, said the quality of the vehicles was “persistently criticized” in reviews. Feedback showed the company “wasn’t ready for prime time” and needs “another 12 to 18 months of engineering” to be competitive, he said.

Some former employees who have witnessed the company’s rapid development firsthand say the recent setbacks come as no surprise.

Three former employees who worked on product testing, engineering or homologation of an earlier model said they had seen cases of safety or durability tests that they felt were insufficient to shorten a vehicle’s development time. Another former employee, who worked at several automakers, said the speed of development of the vehicles was “daunting”.

A VinFast spokesperson called the fraud allegations a “false claim”.

He added: “VinFast VF 8 has successfully passed mandatory security testing [federais dos EUA] in December 2022, three months before our official deliveries. Prior to that, we performed several independent quality, safety, durability and operation in harsh weather tests (…) with hundreds of vehicles worldwide. All of this affirms VinFast’s seriousness and commitment to product development.”

Thuy, the chief executive of VinFast, also refuted claims of development shortcuts.

“We’ve gone through thousands of tests, from our point of view we don’t take shortcuts,” she said. “However, we are not perfect and our products are still not perfect. This is our first product. If you talk to people in the industry, our products are not worse than the products on the market, but they are not perfect.”

She said VinFast offered the recall in the US out of “excessive precaution” for customers. “I think when you deal with software, there are always bugs that you don’t find in testing,” she said.

“What you have to look at is the speed at which we fix our products and how we respond to negative feedback. The speed at which we fix the software is incredible.”

For its global ambitions, VinFast has implemented building blocks to help it establish itself in the US market. In addition to the planned North Carolina plant, the company has set up 13 showrooms in prestigious locations across California, with the aim of coaxing the state’s wealthy residents away from Tesla.

Its Santa Monica retail center, nestled between Louis Vuitton and Tiffany stores in an open-air plaza, draws “a lot of regulars” from the nearby beach, according to one vendor, who asked to remain anonymous.

The test will come as more beachgoers kick off their flip-flops and get behind the wheel of VinFast vehicles.

“It all depends on the product,” said an executive at a rival automaker that supplied VinFast with parts. “If it’s not good enough, you don’t make the starting grid.”

Translated by Luiz Roberto M. Gonçalves