By James Pearson and Phuong Nguyen
HAIPHONG, Vietnam (Reuters) – Transfer over Tesla (NASDAQ:), how a few VinFast?
That is the proposition being provided by the car arm of Vietnam’s largest conglomerate, Vingroup. It is betting large on the U.S. market with its VinFast line of vehicles and hoping that electrical SUVs and a battery leasing mannequin can be sufficient to woo shoppers away from homegrown market leaders like Tesla and Basic Motors Co (NYSE:).
A current arrival on the automotive scene and the No. 5 automobile model in Vietnam, VinFast will not be quick on ambition, with its sights set on a U.S. itemizing and a valuation of as a lot as $60 billion, in line with two sources aware of its plans.
(GRAPHIC: VinFast fifth when it comes to Vietnam gross sales in 2020 – https://graphics.reuters.com/VIETNAM-VINFAST/rlgvdzyjgvo/chart.png)
It can launch in North America and Europe in 2022, CEO Nguyen Thi Van Anh instructed Reuters, becoming a member of a crowded discipline of gamers searching for to compete with Elon Musk’s Tesla, together with a slew of loss-making upstarts fuelled by a Wall Avenue fundraising craze.
“We’re going to North America – U.S., Canada – and Europe on the similar time. In Europe, we will Germany, France and the Netherlands,” Van Anh mentioned in an interview on the firm’s sprawling manufacturing unit complicated close to the northern port of Haiphong.
Standing behind VinFast is Vingroup, Vietnam’s reply to a South Korean chaebol or catch-all conglomerate. Based as an on the spot noodle enterprise in post-Soviet Ukraine, the corporate’s trajectory has mirrored that of Vietnam, certainly one of Asia’s fastest-growing economies, with pursuits spanning actual property, resorts, colleges, hospitals and smartphones.
Even with such formidable native backing, VinFast has its work lower out as business giants comparable to Basic Motors, Toyota and Volkswagen (DE:) spend tens of billions of {dollars} to develop electrical and driverless automobiles.
Based in 2017 with a group led by former Basic Motors Co executives, the corporate is aiming to compete on automobile dimension and worth – pitching an electrical SUV that Van Anh described as “extra luxurious” than these presently on supply.
VinFast vehicles can even include a battery leasing scheme which means the price of the battery, probably the most costly parts of an electrical automobile, is not going to be included within the ultimate worth.
“I’ll provide you with a greater product. I am supplying you with an SUV. I am supplying you with a extra spacious automobile,” mentioned Van Anh, who will relocate subsequent month from Hanoi to Los Angeles to go VinFast’s U.S. operations.
In response to a presentation ready by the corporate for potential buyers, VinFast vehicles can be cheaper in comparison with different electric-vehicle (EV) fashions.
A Tesla SUV sells for round $50,000, however Van Anh, who declined to debate potential rivals, wouldn’t be drawn on how a lot a VinFast SUV would promote for. Two of the corporate’s three electrical fashions are destined for the USA, the place the corporate is concentrating on annual gross sales of 45,000 vehicles, she mentioned.
(GRAPHIC: Gross sales of battery electrical automobiles within the U.S. market – https://graphics.reuters.com/VIETNAM-VINFAST/rlgvdzdojvo/chart.png)
AN EDGE OVER THE COMPETITION?
There’s precedent for Asian carmakers cracking the U.S. market. Toyota within the Seventies and Hyundai within the Nineteen Eighties overcame preliminary scepticism with merchandise that finally stole market share from U.S. producers.
VinFast, which achieved annual gross sales of round 30,000 models final yr in Vietnam and has but to make a revenue, faces an uphill battle.
“Their largest problem is convincing shoppers that they’ve a strong product and a compelling worth proposition,” mentioned Invoice Russo, head of Shanghai-based consultancy Automobility Ltd and a former Chrysler government.
“The product itself appears to be like to have the appropriate look and options, however this can solely get you within the sport. Successful requires a know-how or enterprise mannequin edge over the competitors.”
(GRAPHIC: VinFast funds – https://graphics.reuters.com/VIETNAM-VINFAST/dgkvlyobmpb/chart.png)
The corporate is betting its battery leasing scheme – the place clients would pay a month-to-month quantity roughly equal to what the common client may spend on petrol – will win over U.S. clients.
When the battery, which makes use of cells from South Korea’s Samsung (KS:) SDI, is at 70% of its full lifespan, VinFast will exchange it, Van Anh mentioned.
An identical scheme has already been rolled out in China by Tencent-backed electrical automobile maker Nio (NYSE:), whose ES6 SUV has a beginning worth of round 358,000 yuan ($55,272).
No EV maker can compete with Tesla within the close to future, in line with Michael Dunne, chief government of automotive consulting agency ZoZo Go, pointing to the U.S. firm’s across-the-board strengths.
“However the excellent news is that firms like VinFast do not need to beat Tesla to win. All they actually need to do is convert a portion of the 65 million shoppers who purchased gasoline-powered vehicles in 2020 to change over the electrics,” mentioned Dunne.
VinFast, whose manufacturing facility in Vietnam has the capability to churn out 250,000 vehicles a yr, is planning on conducting most of its U.S. gross sales on-line, eradicating the necessity for a expensive dealership community. It has had 15,000 advance orders thus far for its VF (NYSE:) e34 electrical automobile in Vietnam.
The corporate has employed Jeremy Snyder, a 10-year Tesla veteran, as its U.S. Chief Progress Officer.
Snyder instructed Reuters he was VinFast’s first worker on the bottom in the USA however, between full-time staff and consultants, the corporate now has round 100 individuals working there.
“It’s totally thrilling to convey Vietnam and the USA nearer by means of VinFast,” he mentioned.
TAPPING THE SPAC?
Vingroup’s founder, Pham Nhat Vuong, Vietnam’s richest man, has pledged to take a position $2 billion of his personal cash into the automobile division and Vingroup has poured lots of of thousands and thousands of {dollars} into VinFast by issuing worldwide bonds and promoting off stakes in different models.
However growth over time has pushed up Vingroup’s debt and losses at a few of its ventures have squeezed its cashflow. To turbocharge its progress, VinFast will want extra cash. The corporate is tapping right into a funding frenzy in the USA, the place buyers, together with a few of the world’s largest cash managers, have poured billions into auto startups by way of blank-check firms often called special-purpose acquisition firms or SPACs.
Three sources with direct information of the plans mentioned VinFast was leaning in the direction of a SPAC, though Van Anh declined to touch upon when or how the corporate would generate funding in the USA.
Officers from the U.S. Securities and Alternate Fee will go to Vietnam quickly to satisfy with Vingroup executives about its efforts to listing, two separate sources mentioned. If VinFast does listing in the USA it will likely be the primary Vietnamese firm to take action. “When it occurs, the way it occurs, whether or not by SPAC or by one other technique, we’ll make the appropriate resolution on the similar time,” mentioned Van Anh.
There are lots of of SPACs looking for firms to take public and buyers are determined to establish the following Tesla, whose stratospheric market rally has made Musk one of many world’s richest males.
Nio, which made a internet loss final yr of $860 million, has a market cap of round $67 billion, in line with its New York inventory itemizing and bought just below 44,000 vehicles final yr, near what VinFast is concentrating on in the USA.
A stream of EV-related startups notched up multi-billion greenback valuations final yr regardless of not having merchandise able to promote however their shares have taken a knocking not too long ago.
VinFast likes to differentiate itself from different EV startups.
“Should you take a look at a few of the SPAC offers that already occurred, they don’t actually have what we presently have,” mentioned Van Anh.
“Even when we do not have a product on the earth market, now we have the merchandise right here.”
($1 = 6.4771 renminbi)
