Is Vinfast Heading for a Crash?

Currently, Vinfast, the Vietnamese EV start-up that came into life in 2017, is valued at almost USD85 billion after their shares surged on the Nasdaq; this values the company at almost the same level as Ford and General Motors. Just this month, Aug 15th to be precise, Vinfast made their stock market debut on the Nasdaq in the US of A, and over-enthusiastic investors pushed the stock up by over 270% before common sense started to kick in and it fell back by 19%. Investors were only biding for a mere 1% of the company, which leaves the stock open to wild fluctuations. The remaining shares are all owned by the sprawling Vietnamese conglomerate called VinGroup.

Based on that, you may think that Vinfast had conquered Americaland, but thus far the Vietnamese start-up’s entry into America has been anything but smooth. In fact, it borders on disastrous. Publications like Motor Trend wrote “return to sender”, Road and Track said “Simply Unacceptable” and Inside EVs only said “YIKES!”. Others have been even more blunt, with headlines like “not ready for America” after reviewing the cars offered by the company.

Universally, critics have paned their vehicles for stiff rides, poor quality, mismatching panels, creaks, rattles and so on. The company was contrite and admitted that the critics have identified areas that the company needs to work on and do better to adapt to US consumer preferences and are already working on some software upgrades. This all seems to me like they believe that it is the US consumer who is at fault and not the build quality.

Vinfast is in trouble back home as well. Reports of high staff turnover and low morale in the Haiphong-based company, with the added woes of a first-quarter loss of about USD599 million, which is up from USD411 million for the same period last year and USD2.1 billion for the whole of 2022. The company blames their losses in part on the abandonment of its Internal Combustion engine products and the lower selling price they are getting for their SUV since Tesla started a USA-based price war.

In May, Pham Nhat Vuong, the founder and currently Vietnam’s richest man, announced that they would sell 50,000 cars, up from 7,400 last year. In the USA, the company has already broken ground to build a North American factory in North Carolina. However, last year, they managed to sell only 128 across the 13 dealerships that they already have.

Even if the company sorts out all of the quality issues that they have and achieves their lofty growth targets for the year, there is no way that their valuation will be sustained and a share price adjustment must be imminent. In the US of A, it is a widely held belief that the target of 400,000 is the target to surpass before profitability can be achieved. Last year, Tesla managed to sell about 1.3 million units and BYD about 1.9 million, but half of these were PHEVs.