Could VinFast Be Poised to Follow in Fisker's Footsteps?
Could VinFast Be Poised to Follow in Fisker's Footsteps?
The automotive industry is tough, crowded, and pricey, with clients fiercely loyal to brands that have survived for over a century. Breaking into this sector as a newcomer isn't a walk in the park, and many upstarts, such as Fisker, won't last.
Luckily for those captivated by the young Vietnamese electric vehicle manufacturer, VinFast Auto (VFS -5.16%), there's one significant distinction between Fisker – a wealthy benefactor.
What's happening?
Firstly, let's quickly discuss why VinFast stands out. While VinFast is a 100% electric vehicle (EV) producer with a stronghold in Vietnam and global ambitions, it's a subsidiary of Vingroup JSC, one of Vietnam's largest conglomerates. This conglomerate has a hand in various sectors, such as technology, real estate, retail, healthcare, and more. Not only does Vingroup back VinFast's success, but it also cross-sells VinFast vehicles to its sister business managing fleets of electric taxis.
As VinFast goes through cash at a rapid pace, this wealthy backer will come to the rescue again. By 2026 – the year VinFast anticipates reaching profitability – it will receive funding worth roughly $3.35 billion from its founder and Vingroup itself. Almost $1.97 billion of this new capital is coming from VinFast's founder, Pham Nhat Vuong, who owns around 98% of VinFast shares, both directly and indirectly.
In a press release, Nguyen Viet Quang, VinFast's Vice Chairman of the board of directors and CEO, mentioned:
Vingroup remains committed to a sustainable future. Our green vision underpins all our operations. VinFast's rise to the top of Vietnam's automotive market is a testament to our potential. This achievement propels us forward, fueling our ambition to accelerate growth.
The upcoming actions
VinFast has gained some momentum at home. In 2024, the first 10 months saw over 51,000 EVs delivered by VinFast, surpassing foreign automakers to become Vietnam's first EV manufacturer to sell more EVs than traditional gasoline cars.
VinFast has been moving steadily, launching a 300,000 vehicle-per-year manufacturing plant and completing research and development of its vehicle lineup. It's transitioning from direct-to-consumer distribution to a dealership model and is expanding its reach internationally.
The main aim of this funding round is to provide VinFast with sufficient funds to cover operational costs, investments, and other commitments until 2026, the anticipated break-even date. Expanding into Europe and North America will be tough, competitive, and expensive, but VinFast should outlast Fisker, thanks to its wealthy and dedicated backer – exactly what a young EV company needs as the world moves away from gasoline-powered vehicles.
Since its inception in 2017 until this recent funding round, Vingroup, affiliates, and Vuong have contributed a staggering $13.5 billion in capital. Add the new round of funding, and this figure swells to nearly $17 billion. VinFast won't be like Fisker, but the question is: Can it actually turn a profit by 2026? Stay tuned. The next two years will be crucial for VinFast to establish itself as a longer-term attractive investment opportunity.
Investing in VinFast Auto could be an intriguing proposition due to its wealthy backer, Vingroup JSC. This conglomerate, with its diverse interests in various sectors, is providing VinFast with significant financial support.
Furthermore, with the upcoming funding worth approximately $3.35 billion, VinFast is well-positioned to tackle the challenges of expanding into Europe and North America. This substantial financial backing from both Vingroup and its founder, Pham Nhat Vuong, will help VinFast navigate the expensive and competitive landscape of the emerging electric vehicle market, potentially outlasting competitors like Fisker.