Vietnam’s taxi market leader GSM faces challenges to drive VinFast’s EV sales

[HO CHI MINH CITY] Vietnam’s top electric vehicle (EV) maker VinFast has relied on its largest buyer Green and Smart Mobility (GSM) to drive sales growth, but with the domestic fleet electrification market becoming saturated and international competition heating up, GSM may no longer be the key growth engine for VinFast in the future.

GSM, founded by VinFast chief executive Pham Nhat Vuong, and operator of the electric taxi brand Xanh SM, has scaled up its fleet exponentially to gain dominance in Vietnam’s ride-hailing sector and enter new countries in South-east Asia in the past two years.

However, its contribution to VinFast’s sales has dwindled, as the carmaker has managed to diversify its customer base lately. VinFast’s EV deliveries to related parties, mainly GSM, fell from around 72 per cent in 2023 to just 38 per cent in the first nine months of 2024, the carmaker’s earnings reports stated.

“We believe that GSM is unlikely to be VinFast’s main growth driver,” said Phan Thanh Huyen, an analyst at VNDirect Securities Corporation, citing its declining share of the carmaker’s sales as the key reason. 

This drop is notable given that GSM has continued to expand and recently surpassed South-east Asian ride-hailing giant Grab as the leading player in Vietnam with a 37.4 per cent market share in the last quarter of 2024, according to research firm Mordor Intelligence.

Expansion route

Launched in March 2023, Xanh SM’s fleet size in Vietnam has now reached nearly 100,000 vehicles, including electric cars, e-scooters, and partner-operated units. It serves as a key distributor of VinFast cars to local taxi operators, partnering more than 73 transportation and traditional taxi companies in the country to push the green transition. 

Koketso Tsoai, an automobile analyst at BMI, said that GSM’s influence in the local EV sector may diminish as Vietnamese taxi fleets become fully electrified in the short term. He added: “This saturation in the domestic market means that GSM’s role as a growth driver for VinFast sales could become limited unless it expands its fleet or explores other growth strategies.” 

And the company appears to be doing just that.

The taxi operator expanded into two new markets – Laos in November 2023 and Indonesia in December 2024 – less than two years after its launch. This year, the company plans to scale up Xanh SM’s fleet with at least 10,000 taxis in Indonesia and expand into new markets, including the Philippines and other parts of Asia.

But analysts say this is no magic bullet. “Regarding GSM’s strategies to enter various regional markets, the potential for supporting VinFast’s growth is mixed,” noted BMI’s Tsoai. He added: “(It) will not be simply about adding many vehicles, which is possible but unlikely to be feasible.” He said that the success of GSM internationally will hinge on how well it navigates the competitive landscape and establishes a sustainable presence in the new markets. “If GSM aims to capture market share by slashing prices and introducing many vehicles into its ride-hailing fleet, it could potentially drive sales, albeit at lower margins.”

In a written response to The Business Times, GSM CEO Nguyen Van Thanh acknowledged the challenges posed by limited transportation infrastructure and low EV awareness in Laos, as well as the dominance of local platforms in Indonesia. “Each market has its own unique characteristics, and Xanh SM’s success in each country depends on our ability to adapt to local conditions,” he noted.

A more ambitious target

VinFast is now pushing for a more ambitious sales growth target this year – to double its delivery numbers for 2024, according to its statement on Thursday (Feb 13). Last year’s volume of 97,399 EVs already represented a 192 per cent increase from the performance in 2023.

A key driver for this growth is retail sales of VinFast’s increasingly popular models in Vietnam, pointed out VNDirect’s Huyen.

In January, VinFast’s domestic EV deliveries surpassed 10,000 units, with the affordable VF 3 and VF 5 models leading the charge, collectively accounting for over 7,300 units, according to the company.

GSM contributed to these retail sales over the past years, with CEO Thanh noting that his firm helped over 10,000 individual driver partners acquire VinFast EVs, facilitated by GSM’s partnerships with financial institutions to offer flexible and cost-effective purchasing options. In addition to the widely used VFe34 and VF 5 Plus models in Xanh SM’s fleets, VinFast and Xanh SM have also forged a strong strategic partnership in developing EVs tailored for passenger transportation, according to Thanh.

This collaboration has led to the introduction of the “Green” series, which includes the Limo Green – a seven-seater vehicle designed for the premium segment, ideal for families and travel groups – and the Minio Green, a cost-effective four-seater optimised for daily commuting and operational efficiency.

“We will continue working closely with VinFast... ensuring better performance to meet the operational demands of the electric taxi industry,” Thanh added.

Rising costs

Market watchers noted that while GSM has contributed to VinFast’s financial returns and helped raise the profile of the Vietnamese EV brand, the rapid growth has come with a high burn rate.

GSM has raised its registered capital six times in less than two years, with the latest infusion in December reaching about 5.3 trillion dong (S$279.5 million), according to Vietnam’s national business registration portal. Owned 95 per cent by Vuong, GSM raised its capital from three trillion dong from its inception to around six trillion dong at the end of 2023 and 18 trillion dong in 2024.

This underscores the heavy cost structure and low profitability of a model where GSM must heavily invest in acquiring cars and drivers to leverage network effects, while also offering significant incentives to customers in order to gain market share.

“The viability of GSM’s business will depend significantly on shareholder support and other strategic considerations,” explained Tsoai. “The potential enhancement of VinFast’s brand image and sales through GSM’s growth could indeed be worth the associated financial burdens if it successfully establishes a strong market presence and brand loyalty.”

In 2023 alone, GSM spent US$839 million buying EVs and e-scooters and signed another US$419 million deal to secure additional units from its sister company VinFast, earlier securities filings of the Vietnamese carmaker showed.

According to Vietdata, GSM recorded revenue of about one trillion dong in 2023 and an after-tax loss of nearly 1.9 trillion dong. Even its ride-hailing competitors Be and Gojek, which follow an asset-lighter model, posted persistent losses, with only Grab achieving profitability. “(However,) GSM’s financial situation has limited impact on VinFast as the automaker has diversified its customer base, and it has no direct impact on Vingroup’s earnings as it is Vuong’s privately held company,” VNDirect’s Huyen noted.