The billionaire behind six-month-old Vietnamese auto start-up VinFast plans a feat even Toyota Motor Corp and Hyundai Motor Co could not pull off during their early days: Sell a car in the US.
Pham Nhat Vuong, the Southeast Asian country’s richest man and now in charge of the new automaker, is so intent on exporting electric vehicles to the lucrative US market in 2021 that he is plowing as much as US$2 billion of his own fortune to reach that goal.
His cash would account for half the capital investment of VinFast, which earlier this year began delivering cars to Vietnamese consumers with BMW AG-licensed engines and aims to expand into electric vehicles (EVs).
“Our ultimate goal is to create an international brand,” the 51-year-old tycoon said in an interview at the Hanoi headquarters of the automaker’s parent, Vingroup JSC, which Vuong founded and holds the title of chairman. “It will be a very difficult road and we will have to put in a lot of effort. But there’s only one road ahead.”
The homegrown vehicles made under Vuong’s sprawling real-estate-to-hospitals conglomerate faces an uphill battle to succeed overseas: Automakers such as India’s Tata Motors Ltd and Malaysia’s Proton Holdings Bhd struggled to win over consumers away from their home turf. Even in Vietnam, VinFast Trading and Production LLC has formidable competition from established foreign players such as Toyota, Ford Motor Co and Hyundai.
VinFast follows a long list of Chinese automakers that have also had ambitions to sell vehicles in the US going back more than a decade.
Although the plans have yet come to fruition, Guangzhou Automobile Group Co (廣州汽車集團), Zotye Automobile Co (眾泰汽車) and others have set up local sales units, and research and development operations to show just how serious they are.
Some Chinese brands have also exhibited at US auto shows in the past few years.
The tycoon, whose net worth is US$9.1 billion, according to the Bloomberg Billionaires Index, is undaunted.
Vingroup sold some shares last year and Vuong plans to sell as much as 10 percent of his own shares to raise funds for the ambitious project. He owns 49 percent of VinFast, while the parent, Vingroup, holds 51 percent.
The automaker would not be profitable for as many as five years, Vuong said, adding the local market is “too small” and overseas sales are key to becoming profitable.
Vuong directly owns 26 percent of Vingroup, according to Bloomberg data. Vietnam Investment Group JSC, in which Vuong has about a 92 percent stake, holds 31.6 percent of Vingroup.
VinFast would have to overcome an even more daunting task of winning over demanding consumers in the US and other developed markets, where emissions and crash standards are stringent.
Adding to these challenges is successfully manufacturing and selling electric vehicles. Many Chinese start-ups, backed by billions of US dollars in funding, bet on the prospects for EVs in the world’s biggest auto market, but few are making money.
BAIC BluePark New Energy Technology Co (北汽藍谷新能源科技), China’s biggest maker of pure electric vehicles, forecasts a loss for this year. Unprofitable NIO Inc (蔚來汽車), which is traded in New York, has struggled to assuage concerns that it is running short on cash amid sputtering EV demand.
VinFast’s first EV would not roll off its assembly line until late next year, but Vuong said he plans to export those vehicles to the US, Europe and Russia in 2021.
VinFast must clear several high hurdles to compete outside Vietnam, said Michael Dunne, chief executive officer of automotive consultant ZoZo Go LLC, which specializes in the Asian market.
“It will be some time before the company is ready to compete in the US — still the world’s toughest market,” he said. “You need a solid brand name.”
Many people prefer a second-hand Honda Motor Co or Toyota over a new vehicle with an unfamiliar brand name, Dunne said.
The Vietnamese automaker will need to produce at least 100,000 vehicles a year to be cost competitive, develop a global brand and establish a parts-and-services network, he said.
Still, VinFast has an opportunity to crack smaller Southeast Asian markets, Dunne added.
VinFast, which operates a 335-hectare factory in the northern port city of Haiphong, Vietnam, is selling its first line of vehicles — a hatchback, sedan and sports utility vehicle (SUV) — at below cost. The hatchback retails for the equivalent of US$17,000, while the four-cylinder sedan goes for US$47,400 and its SUV is offered at US$60,400.
The company targets production of as many as 500,000 vehicles a year by 2025. It also makes electric scooters.
In the next few years, Vingroup will have to spend “many trillions of dong per year” to cover losses for VinFast, estimated at as much as 18 trillion dong (US$777 million) annually, Vuong said.
Those losses include financing and depreciation, and as much as 7 trillion dong each year to absorb the hit of selling vehicles below cost, he added.
Vingroup would divest stakes in other units to fund VinFast, while other subsidiaries have been ordered to reduce costs, Vuong said, without providing details.
VinFast would also seek additional loans, in addition to about US$1.95 billion of international loans it has already raised.
Vuong also plans to list VinFast on a Vietnamese exchange and possibly overseas, he said, without elaborating.
“We have the desire to build a Vietnamese brand that has a world-class reputation,” he said.
“Our biggest challenge is that Vietnamese products do not have an international brand. To many international friends, Vietnam is still a poor, backward country,” Vuong said. “We will have to find a way to market and prove our products represent a dynamic and developing Vietnam that has reached the highest standards of the world.”
With assistance from Ville Heiskanen
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