Vietnam’s richest man shifts strategy after US$14 billion bet on EVs
The opening of VinFast’s first overseas assembly plant in India earlier this month is a crucial piece in CEO Pham Nhat Vuong’s Asia pivot
[KUALA LUMPUR] Pham Nhat Vuong spent billions of US dollars on an unsuccessful push to turn his upstart electric automaker into a major player in the US and Europe.
Now, Vietnam’s richest man is changing tack, betting his path to halting deep losses at VinFast Auto runs instead through Asian markets such as India, Indonesia and the Philippines.
It’s the latest twist in an against-the-odds quest by the 57-year-old property tycoon to build a global carmaker. At least US$14 billion has already been poured into VinFast, including funding from Vuong’s conglomerate Vingroup, its affiliates and external lenders, as well as more than US$2 billion of his own fortune. He says he’s willing to support VinFast until his money runs out.
Vuong’s commitment has kept the company afloat even as losses mount. Last year it booked US$1.57 of costs for every US$1 of sales and logged a US$3.2 billion loss.
It’s a race against time, said Tu Le, founder of Detroit-based auto consulting firm Sino Auto Insights. While VinFast is now gaining traction in Vietnam, it’s unclear whether it can build a presence in Asia quickly enough to compete against rivals from China and elsewhere.
The opening of its first overseas assembly plant in India earlier this month is a crucial piece in Vuong’s Asia pivot. The factory near Thoothukudi, the Indian port city, will be capable of producing 150,000 vehicles annually for South Asia, the Middle East and Africa. It’s part of US$500 million VinFast will spend in its initial India foray, an investment the company expects to eventually grow to US$2 billion.
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In June, the company inaugurated its second Vietnam plant that initially can produce 200,000 vehicles annually, and it’s months away from a planned opening of a smaller factory in Indonesia.
The new target markets are “late bloomers” in terms of EV (electric vehicle) sales, but hold tremendous potential and are currently entering a vibrant phase of growth, the company said.
The expansion plans follow VinFast’s push to establish itself in North America and Europe. But the effort was marred by initial bad reviews of its cars and a recall over malfunctioning software. Of the company’s 97,399 global deliveries in 2024, about 90 per cent were in Vietnam. Last year it delayed a planned North Carolina EV factory until 2028.
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The southern half of Asia, however, is home to rapidly growing economies with well over two billion consumers. Rates of car ownership are lower than in the West, and there are fewer established domestic brands. But it’s less affluent, meaning demand likely will be driven by smaller cars with slimmer profit margins.
“Like many other companies, VinFast makes short-term adjustments to its business plans in response to changing circumstances,” the company said.
Since VinFast commenced operations in 2017, competitive and inexpensive Chinese EV-makers have emerged, a threat not just to startups but also giants such as Volkswagen and Tesla.
While there’s less competition in South-east Asia than in the West, “that’s going to change when the Chinese bring the price war”, Le said. If VinFast can’t establish itself before this, “I don’t know how much future it will have outside Vietnam.”
Vuong expects VinFast to break even at the end of next year.
Filings show that 92 per cent of its cumulative revenue over the last four years came from Vietnam. One-third of that total came from related parties. GSM Green and Smart Mobility Joint Stock, a taxi company in which Vuong holds a 95 per cent stake, has purchased thousands of VinFast vehicles. In other words: Vuong is moving money from one pocket to another.
Establishing a new car brand is not easy. It takes time to gain brand recognition and customer trust, and to build out networks of service centres and charging stations, said Thanachai Vorachaivanich, a managing director with automotive analytics firm Proliance. Several analysts said VinFast would have been better off establishing itself in Vietnam first instead of its everywhere-at-once approach, which is costly and uncertain.
VinFast grew out of Vingroup, a conglomerate involved in everything from real estate to hospitality and whose revenue amounts to around 1 per cent of Vietnam’s gross domestic product. Its property development arm is the most profitable, and has helped bankroll the EV maker. Vuong has channelled at least US$8 billion from his corporate group into VinFast as grants, loans and conversions of debt to equity.
VinFast remains a financial drag on Vingroup’s results, said Ken Foong, an analyst with Bloomberg Intelligence. But that might not matter all that much to Vuong, who controls Vingroup and has a US$11 billion fortune, according to the Bloomberg Billionaires Index. Barring an economic downturn in Vietnam or a drastic change in Vingroup’s access to capital, the real estate business might generate enough money to sustain the carmaker as long as Vuong wants, Foong said.
Dan Gittleman, managing partner at automotive software consultant SanBoca Insights, has turned from sceptic to believer in Vuong’s vision.
Two to three years ago, “I said: ‘Zero chance that this guy could do it’”, Gittleman said. But the company has learnt from its mistakes, grown well in Vietnam and is now in a good position to expand overseas, according to Gittleman.
“The name pops up way more than you would think with people in the automotive world,” he said. “Even here in Florida, I have seen a few of ‘em on the road.” BLOOMBERG
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