▲VinFast showroom in Santa Monica, California (Photo courtesy of the Korea Automotive Research Institute)


The possibility of benefiting from the windfall from the de-China trend and the support of the government and the public.
Changes in the global business environment, including IRAs, and risks to Vingroup's financial health.

A report by the Korea Automobile Research Institute has been published, stating that there are both positive and negative factors for VinFast, which has announced its goal of entering the European and American markets.

The Korea Automobile Research Institute (KARI) shared positive and negative factors regarding the business direction of VinFast, a Vietnamese automobile manufacturer, through its industry trend report.

Five years after entering the auto industry, Vietnam's VinFast has announced it will discontinue all internal combustion engine models and focus solely on electric vehicles, aiming to sell more than one million units by 2028.

VinFast, which has demonstrated its ability to launch a new car in just two years based on past technical collaborations with BMW and others, recently announced plans to convert all production lines to 100% electric vehicles, quickly revealing its lineup, and said it is expanding the foundation for related business expansion, such as establishing a battery pack factory and installing electric vehicle charging stations.

The most significant feature of this business direction announcement is that it will prioritize business development in North America and Europe over the limited domestic market.

Over the past five years, new car sales in Vietnam have been around 300,000 units per year, and are expected to grow to around 500,000 units by 2022. As expected, the size of the finished vehicle market is still small compared to the population of 100 million.

Unlike other companies that target overseas markets after conquering the domestic market, VinFast is proactively challenging the European and American markets.

The company opened six showrooms in California in July 2022 to provide customers with promotional and experiential services for its electric vehicle models, with plans to expand to all regions of the United States in the future.

Not stopping there, at the 35th EV International Conference held in Oslo in June 2022, the company announced plans to expand its stores to over 50 locations across Europe, including 25 in Germany, 20 in France, and 5 in the Netherlands.

The positive factors for VinFast's future, as investigated by the Korea Automobile Research Institute, include the rise of ASEAN in line with the de-China trend and support from the government and the public.

As the trend of moving away from China in the electric vehicle supply chain spreads, the ASEAN region is likely to reap windfall benefits, and among them, Vietnam's VinFast, with its strong manufacturing base, is likely to benefit.

Considering the successful examples of Asian countries that fostered the automobile industry through close cooperation between governments and businesses in the past, the intangible growth engine of government and public support is also expected to be a positive factor for VinFast.

On the other hand, the delay in entering the US market due to the US Inflation Reduction Act (IRA) and the company's financial status are cited as risk factors.

VinFast had planned to invest $4 billion to build an electric vehicle and battery factory in North Carolina by the first half of 2024, but the IRA has restricted its ability to receive electric vehicle subsidies.

Due to the IRA, electric vehicles exported to the U.S. are ineligible for the $7,500 federal tax credit per vehicle.

In 2021, Vingroup achieved sales of 130.8 trillion dong (approximately 6.5 trillion won), but failed to achieve sales of electric vehicles. New business investments resulted in a post-tax loss of approximately 7.5 trillion dong (approximately 374.3 billion won), increasing financial risk.

In addition, in order to focus on the electric vehicle sector, the company stopped producing smartphones and TVs, which have limited value creation, in addition to internal combustion engine vehicles, resulting in a pre-tax loss of 23.9 trillion dong (approximately 1.2 trillion won) in the manufacturing sector alone.

Other tasks currently being considered include preparing for an initial public offering (IPO) in the U.S., establishing sales and maintenance infrastructure, and improving brand awareness.