Pham Nhat Vuong, Vietnam’s wealthiest individual, has joined the ranks of influential entrepreneurs like Elon Musk and James Dyson in making substantial investments in electric vehicles (EVs). However, his company, VinFast, has encountered numerous challenges in its pursuit of success.
Navigating a Challenging EV Landscape
Despite significant financial backing, other notable figures like Dyson and Jia Yueting, founder of the so-called “Netflix of China,” have faced difficulties in their EV endeavors. As the market becomes increasingly competitive, Tesla’s success story is a distant possibility for many emerging players.
VinFast’s challenges have been expensive, with Vingroup JSC and its affiliates and lenders contributing $8.2 billion over six years to support its operations and capital expenditures. Despite the massive investment, VinFast has sold only 93,000 vehicles and 162,000 e-scooters. Nevertheless, Vuong remains undeterred, committing another $2.5 billion to the company, $1 billion of which will come directly from his personal funds.
VinFast faces stiff competition as it tries to establish a foothold in the American EV market. With Tesla lowering prices and other well-established manufacturers vying for market share, the Vietnamese automaker must invest heavily in branding, distribution, and retail networks. It will also need to overcome the manufacturing challenges that Musk and Tesla once faced.
VinFast’s Long-Term Viability
Experts like Alexander Vuving, a professor specializing in power politics and Vietnam at the Asia-Pacific Center for Security Studies, question whether VinFast can endure the long-term financial strain its EV venture will likely bring. The company may need to sustain losses for many years before it can achieve profitability.
VinFast has experienced several setbacks, including a delayed initial public offering (IPO), the short tenure of former global CEO Michael Lohscheller, and mixed reviews for its VF 8 sport utility vehicles. Furthermore, the company’s plans to begin customer deliveries have experienced multiple delays.
The Inflation Reduction Act poses another challenge for VinFast, as it benefits manufacturers with existing EV and battery production facilities. With VinFast’s North Carolina facility not expected to begin production until 2025, the company may struggle to maintain a competitive edge in pricing and manufacturing.
Setting up distribution, replacement parts, and service networks will be crucial for VinFast’s success. However, these networks are not easily established, and without them, customers may be hesitant to invest in a vehicle that lacks the necessary infrastructure for repairs and maintenance.