Yahoo Finance VinFast: The Vietnamese EV maker with a sky-high valuation and volatile trading
Chances are most Americans have never heard of EV maker VinFast (VFS). But that hasn’t kept the company out of the limelight, due to its sky-high valuation and violent swings in stock price.
VinFast shares are on the move again today, up 11% in early trade but slipping again to a nearly 9% loss in midday trade. On Tuesday, the stock shed a whopping 44%, snapping a six-day winning streak and losing $83 billion in market cap in one day. But that’s not the whole story: VinFast shares have climbed almost 700% since the company listed on Aug. 15 via a SPAC merger with Black Spade Acquisition.
So, what is VinFast?
The VinFast story began when entrepreneur Pham Nhat Vuong founded Vingroup in 1993, a conglomerate that eventually operated in the food, entertainment, and healthcare spaces in its home country of Vietnam. Soon after, Vingroup entered the auto business, a first for a Vietnamese company.
“Vuong decided to enter the automotive industry through a VinFast subsidiary,” Sam Fiorani, VP at manufacturing data provider AutoForecast Solutions, told Yahoo Finance. “The new venture purchased an old General Motors plant and worked with BMW to introduce its first [internal combustion] vehicles.”
Vinfast’s GM-based Fadil sub-compact quickly topped the Vietnamese sales charts in 2021, but the company shifted its focus to electric vehicles soon after. Next the company did something extraordinary, launching its EVs in the highly competitive US market soon after launch, beginning sales in Q1 this year.
“Vietnam and VinFast has accomplished in the space of a few years what its neighbors in SE Asia like Thailand and Indonesia could not achieve over decades of trying: Manufacturing a car to call their own,” let alone one that’s on sale in the US, Asian autos and supply chain expert Michael Dunne said to Yahoo Finance.
Concurrent with the sale of its cars in the US was the SPAC merger of VinFast with Black Spade Acquisition. To say trading in the stock has been volatile over the past two weeks would be an understatement.
During this period, the market cap for VinFast swelled to nearly $200 billion at one point, more than the valuations of GM, Ford, and even Volkswagen. But there is more than meets the eye here when talking about that valuation. Less than 1% of VinFast’s shares are available for trading, with the balance owned by Pham Nhat Vuong and his family and not available for trade. The small “float” of VinFast shares means relatively small stock trades can amplify into big swings in price for VinFast, meaning it has become a favorite of small retail traders, and now a “meme” stock, as noted short seller Jim Chanos dubbed it this week.
Can VinFast succeed — and justify its valuation?
VinFast’s valuation, now around $100 billion, is frothy compared to the big automakers listed above, and of course Japanese behemoths like Toyota, Nissan, and Honda.
VinFast sold only 24,000 cars globally in 2022, a fraction of the deliveries made by major global automakers, and VinFast’s net loss swelled to nearly $600 million in the first quarter, and is expected to widen according to Bloomberg.
“Valuing the company above established automakers, however temporarily, is not a sign of confidence in VinFast, but rather short-term investors taking advantage of a high-profile stock in a market,” AutoForecast Solutions’ Fiorani says. “In the long term, VinFast will need to showcase a competitive product and a unique market position, which has not been displayed.”
Auto purchasing expert Tom McParland of AutomatchConsulting.com added that VinFast EVs suffer from numerous quality issues and that VinFast doesn’t have the brand prestige or recognition of more well-known automakers. McParland also said he has come across many customers who distrust auto products not made in Japan, Europe, or the US.
This is potentially where VinFast’s manufacturing strategy could come into play. The company announced last year it planned to build a $4 billion plant in North Carolina, with a capacity of 150,000 vehicles annually, and employ 7,500 local workers.
Geopolitics might also favor VinFast here. “Like with Japan and Korea before it, US government officials might like to see Vietnam, a strategic partner country in Asia, succeed in America,” Dunne said. “VinFast is also the first Asian country after Japan and Korea to start building a factory (North Carolina) in the United States.”
Regardless, the company still has to persuade Americans to buy a new brand, with vehicles costing in the $40,000-$80,000 range to boot. If the company can build on sales and get some momentum going, the inclusion of the federal EV tax credits for North American-made cars could help VinFast tremendously.
Those are some big “ifs,” however, and though VinFast says it is working on fixing earlier car issues with software updates and other fixes, it has a long way to go to profitability.
“With the emergence of the tax incentives for electric vehicle sales, the North Carolina plant becomes a necessity, [but] it will take years for the volume to grow enough to make the local plant profitable,” Fiorani said. “While the jury’s out on the company’s potential success, VinFast’s chances, under current market and economic conditions, are less than 50/50.”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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