VinFast shares approached meme-stock status in 2023 making it briefly the third most valuable car company in the world. Now that the shares have returned to earth, the company faces other challenges. The ambitious and expensive expansion plans are growing sales but costs far exceed revenues leading to a difficult-to-swallow $2.4 billion loss for the Vietnamese company in 2023. The struggles reflect broader issues in the EV market globally marked by heightened competition from rivals like Rivian and established players like Tesla and China's BYD. Beyond the EV hype which captivated many, concerns remain about limited charging infrastructure, high costs, ethical mining practices, and the environmental impact of relying on fossil fuels for electricity generation.
VinFast's Volatile Journey: Meme-Stock or Next Big Thing?
Vietnam's top electric vehicle ("EV") manufacturer, VinFast, became an overnight investor sensation in August 2023, when its shares were listed on Nasdaq under the ticker "VFS". The relatively insignificant company flirted briefly with meme-stock status achieving a market cap exceeding $191 billion, jumping 688% on the opening day of trading with a six-day rally making it one of the fastest-rising large-cap stocks in the world, for a period.
The ascent made it the third largest automobile maker in the world, behind only Tesla and Toyota. However, this meteoric rise was short-lived. The stock price plummeted, losing over $83 billion in a single day.
After the first VinFast wipeout of value, when the market cap collapsed to $107 billion, it was still more valuable than companies such as Blackrock and FedEx. Fundamentals alone can't justify these sky-high valuations. It is difficult to find any credible explanation for the valuations leaving most to stop speculation and simply place it in a "meme-stock" category.
Today in February 2024, VinFast's market cap hovers around $12 billion.
Expansion Plans and Financial Landscape
In 2023, VinFast reportedly sold a mere 34,855 electric vehicles with 72% being sold in its home market of Vietnam. International expansion plans are in the works in markets in Southeast Asia, America, Canada, and Europe. It is busy constructing a $2 billion manufacturing complex in North Carolina and plans more factories in Indonesia, India, and beyond.
Signs of a slowdown for the company began to appear when in late-2023 Tran Mai Hoa, deputy chief executive officer of sales and marketing for VinFast Global commented:
''...amid economic headwinds, slow EV adoption rate in certain regions has adversely affected the deliveries plan."
While VinFast's revenues are growing, its costs are growing faster. The aforementioned manufacturing facilities in America, India, and Indonesia are costly and risky moves for the young automobile maker. The firm recently announced a net loss in the fourth quarter of 2023 of $650.1 million, 3.4% higher than the previous quarter, bringing 2023's losses to $2.4 billion for the year. The staggering losses achieved were 14.7% more than the losses from 2022.
Some good news for the company is that revenues are climbing. From 2022 to 2023 sales jumped 91% and the company plans to deliver a record 100,000 cars this year, up from 35,000 in 2023.
VinFast Struggles Part of Wider EV Slowdown
VinFast isn't the only struggling EV manufacturer. Rivian had a disappointing fourth quarter for 2023 and has signaled shakiness. Tesla is one of the stronger performers but has recently been surpassed by BYD so is no longer the largest EV manufacturer despite having the first-move advantage. BYD is the top performer owing in part to its ability to subsidize production made possible by having the Chinese Communist Party ("CCP") as a shareholder and influencer of the company at the boardroom level. China's dominion of the critical minerals required to produce EVs, and willingness to subsidize production to gain market share, is a large advantage for BYD.
Elon Musk on a recent investor call warned about this:
"Chinese car companies are the most competitive car companies in the world... If there are no trade barriers established, they will pretty much demolish most other car companies in the world."
EVs have lost luster in markets such as America due to difficulties in finding charging stations, pricing, costs to replace batteries, and difficulty making certain repairs. Other customers are discouraged by the unethical mining practices in which some of the critical minerals, such as cobalt, are extracted from the earth and also the amount of electricity required to charge an EV. The customer has realized EVs aren't generally any "greener" than traditional gasoline-powered cars and that the electricity to charge EV batteries is astronomically high and in almost all cases produced from burning oil, gas, and coal.
VinFast's rollercoaster ride underscores the inherent volatility and uncertainties facing EV manufacturers in today's market. While the road ahead may be fraught with challenges, it also presents opportunities for innovation and strategic collaboration, paving the way for a more sustainable and resilient automotive industry. BYD and Telsa will adapt and the path for VinFast is likely only to get tougher. Despite that, this is one of the most exciting stories out of Vietnam and shows that homegrown companies and entrepreneurs can compete and make their marks on the global stage.
