Vietnamese automaker VinFast saw its stock continue its meteoric rise Monday, as shares surged 21% Monday morning. The price rise prolongs last week’s rally in the stock, which has seen its price quadruple since its IPO and giving it a market value of $160 billion.
That makes it the world’s third-most valuable automaker behind Tesla and Toyota. VinFast is owned by the Vietnamese conglomerate Vingroup, which is in turn owned by Pham Nhat Vuong, the company’s founder. Less than 1% of the company’s shares trade on the open market, so any price movement is sure to be volatile.
Why so high?
The valuation is puzzling, given that VinFast still has a long way to go before it can begin effectively competing with established OEMs, who are about to release a deluge of EVs as well as existing EV startups such as Rivian and Lucid. The only explanation for the stock’s spiraling valuation is due in part to investor interest in EV companies.
But while the soaring blue-sky valuations reveal the EV SPAC bubble is not over, so too is the fact that such quick-rising stocks often fall nearly as rapidly. Just ask Rivian, Lucid, Canoo, Fisker or Lordstown Motors, all of which had stock prices that once fetched far more than they do now.
According to S&P Global Mobility, a mere 137 VinFast EVs were registered in the U.S. through the end of June. Vinfast anticipates selling up to 50,000 electric vehicles this year, vs Tesla’s forecast of 1.8 million vehicles. Yet the automaker is entering the European and American markets at a time when demand for EVs is slackening, leading Tesla to initiate a price war to maintain its market dominance.
And VinFast has yet to turn a profit, having posted accumulated net losses of nearly $6 billion as of March 31, 2023. More notably, as of March 31, the company had about $1.7 billion in long-term debt and roughly $158 million in cash and cash equivalents. Therefore, it’s very possible that it will issue shares or take on additional debt in the near future to finance growth.
VinFast’s fast start
Founded in 2016, VinFast is part of Vingroup, a Vietnamese conglomerate with a wide range of businesses headquartered in the main port city of northern Vietnam’s Haiphong province. Three years later, VinFast manufactured its first domestic car, a modified version of the BMW X5 SUV.
The company plans to sell five battery-electric vehicles in the United States: the VF 6, VF 7, VF 8, and VF 9. It is using the same direct sales model as Tesla, yet there’s a difference. While consumers will buy the physical cars, they will have to lease the battery packs, from a variety of bundle options.
In 2022, VinFast launch its first American showrooms in California and begin shipping the $46,000 VF8 battery-electric SUV to customers there in March of this year. The second model, the VF9, an SUV, is now open for reservations.
It is currently exporting automobiles to the United States from Vietnam, where it has a factory, and it is still a minor player in the global automobile industry, having delivered 18,700 automobiles as of June 30 since beginning production in 2021, primarily in Vietnam, of which 740 have been bought by Americans.
In the meantime, funds raised by the company’s IPO earlier this year are funding VinFast’s new manufacturing facility in near Raleigh, North Carolina, an estimated $6.5 billion investment. According to officials, up to 13,000 people in North Carolina might be employed by the new factory.