Vietnam’s Vingroup plots ambitious push into US car market
Conglomerate seeks to sell high-end vehicles including electric cars as it ponders US IPO
Vingroup, Vietnam’s biggest conglomerate, plans to take VinFast, the country’s first homegrown car brand, overseas. The group is making plans to enter the US, one of the world’s most competitive car markets.
And it does not want to sell just cars but high-end vehicles — including electric cars, a segment that is still establishing a foothold among consumers. The company recently received a licence to test autonomous electric vehicles with self-driving features on roads in California, alongside the likes of Tesla.
Vingroup has spoken of building a US research office and even a factory. The company’s ultimate aim is to conquer consumers in the world’s second-largest car market, where Vingroup says it also plans to build a factory. Veni, Vidi, VinFast, as Julius Caesar might have said of its ambitions. It is an extraordinary leap of faith and confidence on the part of Pham Nhat Vuong, Vingroup’s founder and Vietnam’s richest man, who is ploughing $2bn of his own money into the car business.
The group is also looking at a US listing or a merger with a special purpose acquisition company. It said last week that its advisers for this included JPMorgan and Deutsche Bank. “The company will issue an appropriate announcement should any transaction be determined,” Vingroup told the Financial Times, when asked about the possible listing. In April Reuters, citing two unnamed people familiar with the matter, reported that the proposed flotation would value VinFast at about $60bn — or several billion dollars more than the current market cap of 117-year-old Ford Motor.
Never mind that VinFast only began making cars in 2019, and sold only 30,000 of them last year. Vingroup’s plans come as the country’s ruling Communist party seeks to encourage the development of large private companies able to build national brands. “The Vietnamese government wants to promote industrialisation, and sees the automotive industry as a key one where they can join the global value chain and develop a global car brand,” said Le Hong Hiep, a senior fellow with ISEAS-Yusof Ishak Institute in Singapore. “It’s symbolic of the rise of Vietnam as well.” Vietnam is often compared with China 20 years ago, with a foreign investment-fuelled take-off economy that still mostly makes foreign companies’ products. What it does not yet have is a national champion ready to start shipping “Made in Vietnam” and identifiably Vietnamese goods to the outside world.
If anyone has been preparing to stake this claim, it is Vingroup. The company was founded in 1993 as Technocom in Ukraine where Vuong started a successful pot noodle business after studying in Moscow, sold it to Nestlé, then invested back home, at first in real estate — still Vingroup’s cash cow — and resorts.
Over the past decade Vingroup has expanded into retail (VinMart), phones and televisions (VinSmart) and new areas such as artificial intelligence, often with foreign partners. VinFast bought in expertise from BMW and design house Pininfarina in developing its first cars.
But now Vuong is exiting some of these businesses to focus on cars. Vingroup dropped plans to start an airline early last year, shortly before Covid-19 hit Vietnam. It merged its retail business with fellow conglomerate Masan, ceding control of it. And most recently it jettisoned VinSmart.
The company, which Bloomberg reported could raise as much as $3bn in the US, has chosen a buoyant moment to tap capital markets. Notwithstanding VinFast’s short record, the company might plausibly pitch itself as a technology play, given its niche in AI-powered electric cars. VinFast in January launched three self-driving models.
But strip away the tech and carmaking is a rough, old-school business, marked by intense competition among entrenched players. “VinFast — like any EV start-up — will encounter daunting challenges when entering the US market,” said Michael Dunne, chief executive of ZoZo Go, an automotive consultancy.
“How are you going to convince American buyers to take a chance on the new kid on the block?” In the case of electric cars, there are additional challenges around things such as charging infrastructure. It is also an open question how Vingroup’s hard-charging corporate style will wash on US shores. However, Dunne said VinFast could profit from the fact that the Biden administration is promoting electric vehicles — and the market is still new. “There is a window for VinFast to capture EV buyers before the arena gets too crowded.”
By John Reed – The Financial Times – June 2, 2021