Vingroup launches race for Asian brands of electric vehicles in the United States and Europe
HANOI – Vietnam’s largest conglomerate Vingroup is pushing hard as it prepares to enter Western auto markets with its first electric vehicles, just a few years after its first foray into auto manufacturing.
Two electric models from subsidiary VinFast will be on display at the Los Angeles auto show next month in California. The company will begin taking orders in the United States and Europe in the first half of next year. Pricing and other details are expected to be announced on November 17.
“We have made vigorous investments and conducted extensive market research to create premium electric vehicles that will satisfy the desires of customers around the world. This is just the start, ”Vingroup Vice President Le Thi Thu Thuy said this month.
With electricity still facing hurdles for wider adoption in Vietnam, overseas markets will be key to meeting Vingroup’s goals for a business the company is rapidly integrating into a vital part of its portfolio.
VinFast has set an ambitious goal of eventually selling 160,000 to 180,000 vehicles per year in the United States, which equates to 1% of all annual car sales there.
The company is preparing to roll out its e34 electric sport utility vehicle in Vietnam this year. The car, priced at 690 million dong ($ 30,300), can travel 300 km on a full charge. This will mark the first release of an electric model here by a major automaker, domestic or otherwise, with a base in the country – a point that VinFast hopes will pique the interest of affluent consumers.
The Vietnamese auto industry reacted with some surprise to the enthusiasm with which Vingroup has launched into the field, going so far as to manufacture its own batteries in-house to reduce costs.
The conglomerate plans to invest nearly $ 400 million in a new battery factory in central Ha Tinh province. The installation, which is scheduled to open next September, will start with an annual capacity of 3 gigawatt hours in a first phase, reaching 5 GWh in 2025.
The facility will produce lithium iron phosphate batteries, which will not use some expensive materials, such as cobalt, found in standard lithium-ion batteries. Vingroup is expected to receive technical assistance from its partner Gotion High-Tech, a major Chinese battery manufacturer.
Vingroup, Vietnam’s largest private sector conglomerate, is yet another newcomer to the auto industry. It recently started manufacturing conventional gasoline vehicles in June 2019.
Profitability is always an issue. The company sold around 30,000 vehicles last year – enough for around 10% of the Vietnamese market share, but nowhere near the 250,000 it can manufacture each year.
Vingroup’s manufacturing segment, which focuses on automobiles, posted a pretax loss of 11.3 trillion dong in the first half of 2021, more than double the red ink a year earlier. Viet Capital Securities estimates that VinFast will break even in terms of earnings before interest, taxes, depreciation and amortization in 2026.
The conglomerate is concentrating its resources in the automobile sector and its main activity in real estate while reducing its size elsewhere. It announced at the end of 2019 its intention to get rid of its retail activities – the most important in Vietnam – and decided in May to end the production of smartphones and television.
Founder and Chairman Pham Nhat Vuong said Vingroup’s tenacity in pursuing its automotive ambitions was “not for the company, but for the country.” It may be related to the desire of the Vietnamese government and the ruling Communist Party to develop the country’s auto industry.
By entering the electric vehicle market very early, before the hierarchy is firmly established, Vingroup aims to carve out a niche in the industry. The conglomerate is seeking a share of the huge US and European markets, following Chinese players like SAIC Motor and XPeng Motors that have expanded into Europe.
Brand strengthening will be crucial to making inroads in the United States and Europe. The United States is home to more than 2 million people born in Vietnam or of Vietnamese descent, but Vingroup is little known there outside of this group.
In an effort for greater recognition, Vingroup is considering listing VinFast in the United States.
“If the IPO is successful, Vingroup could both raise funds and gain notoriety,” said an analyst at Tokyo-based Aizawa Securities.
But the westward expansion also means competing with leading electric vehicle maker Tesla, as well as big-name automakers like Volkswagen. “Vingroup will need to take aggressive action regardless of their impact on profitability until the brand is more established,” the analyst said.