It seemed like a Cinderella story at first – an upstart carmaker from Vietnam listed this year briefly became worth more than Volkswagen and General Motors.
But now, VinFast is facing a major setback thanks to huge
losses of over $1.4 billion dollars.
The three months to September alone saw around $623 million
in losses for VinFast, despite increased vehicle shipments of 10,027 cars
during that time period.
Unfortunately for the company, its new US model hasn't been well-received by reviews and that has hit their sales hard.
VinFast Aims to Sell 50,000 Cars this Year
VinFast, the Vietnamese car maker, aims to sell 50,000 cars
this year despite only shipping out 21,000 in the first nine months of the
year. The breakdown between their international and home market sales has not
been disclosed by the company.
It appears that there have been strong gains in North
America as VinFast’s revenues for Q3 2023 were more than double those from the
same period one year ago at $342.7 million - a 3% increase over the previous
three months.
However, VinFast's ambition to become Vietnam's answer to
Tesla has hit some setbacks due to bad reviews and increased investment
required beyond what they had initially estimated.
The dramatic slide during Q4 of 2023 will no doubt be in investors' minds when considering future investments into this upstart auto manufacturer from Hanoi.
Owner Pham Nhat Vuong has Pledged to Induce $2.5bn to the Company
Pham Nhat Vuong, Vietnam’s richest man and owner of VinFast
(the country’s only carmaker) has pledged to induce $2.5 billion dollars to the
company in grants and loans. This money is expected to come from Vuong himself
as well as other major shareholders over the next 6 months.
The future of VinFast relies heavily on vehicle sales for
its Green and Smart Mobility (GSM), which is a Vietnamese taxi company that
happens to be controlled by Vingroup, the parent company for VinFast.
With this injection of capital, they now have plans for global expansion with factories in India and Indonesia. The booming profits are likely thanks to their new electric models that have become incredibly popular within both domestic customers and foreign markets alike.
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VinFast is Also Planning Cost-Cutting Measures
VinFast, the first Vietnamese carmaker to tap into the
global market, is also looking at "cost-cutting measures" in order to
remain competitive. This news follows recent reports that the company was
struggling amidst booming profits.
So, despite having strong momentum in the business – with
growing delivery volumes and increased revenues as well as an improved path to
profitability – VinFast knows it still has room for improvement.
“We are working on identifying opportunities which exist
across our cost base including manufacturer supply chain diversification and
regional overhead reduction," said David Mansfield, VinFast's chief
financial officer!
The end goal? To strengthen their balance sheet even more so they don't have anything holding back success or progress when it comes to producing excellent electric vehicles for a larger customer base!
The Shares of VinFast have Fallen Nearly 90%
VinFast is quickly becoming the biggest loser in the stock
market this year. Despite posting booming profits, shares of VinFast have been
plummeting since being listed on the US market in August through a merger with
SPAC.
The Vietnamese carmaker controlled by its billionaire
founder is currently trading at under $10, investors appear to be unimpressed
with the amplified buzz behind VinFast.
What’s more, these losses could be attributed to the high
valuation of the company when it went public (more than $200bn) – as it is
currently valued at $19bn, making it more valuable than both Nissan, Renault
and Volvo Cars despite having limited experience in auto manufacturing.
Experts are speculating that investors may have
overestimated their investment despite VinFast’s good fundamentals, dealing a
big blow to its founder who was hoping for an immense surge following its
initial public offering.
Nonetheless, time will reveal whether or not shares will pick back up again after such a dramatic drop!
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The Bottom Line
Despite reaching new heights in revenue, VinFast was unable
to recoup deductions and losses of $1.4 billion. The automobile industry as a
whole has weathered tumultuous times over the past year thanks to global
pandemics and trade interruptions.
Yet despite this climate, VinFast has continued producing
cars with reasonable success within Vietnam’s borders—and with their bold step
of joining NACS in 2022 they are well-positioned for future profits.