It’s intriguing how people often find value in unexpected places, including within automakers with the hopes of making a quick, or perhaps not-so-quick, profit.
Indeed, VinFast, the company behind the problematic VinFast VF 8, which faced harsh criticism due to issues with build quality, range, and service, has somehow managed to surpass the valuations of both Ford and General Motors. Astonishingly, after its debut on the New York Stock Exchange, VinFast’s valuation has reached $85 billion, surpassing Ford’s $48 billion and GM’s $46 billion.
Two fundamental questions arise: how did this happen, and why?
The ‘how’ is relatively straightforward. VinFast chose to go public via a method commonly used by various electric vehicle startups—a special purpose acquisition company (SPAC) or shell company, allowing for a swift listing and trading process. This approach is favored by many emerging EV companies.
The ‘why’ is the more intriguing aspect. Why would investors choose to invest in a relatively new Vietnamese automaker when its initial batch of US products received less-than-enthusiastic reviews?
As reported by the BBC, investors appear to be positioning themselves at the forefront of a potential East Asian powerhouse before it becomes a major player. Bill Russo, Founder and CEO of Shanghai-based Automobility, suggests that investors believe in the future of electric vehicles and anticipate the emergence of a cost-effective East Asian competitor in the US market.
The anti-China sentiment in the US has also contributed to this interest, driven by initiatives like the Inflation Reduction Act, which aims to reduce automakers’ reliance on China for batteries and components. VinFast is among the manufacturers planning to establish a US-based plant to capitalize on this trend.
Although China dominates the global car market and EV production, US investors seem optimistic that VinFast, hailing from Vietnam, could emerge as a significant contender in the electric vehicle race. The company enjoys substantial financial backing from its parent firm, Vingroup, and its chairman Pham Nhat Vuong, who is Vietnam’s wealthiest individual.
According to Russo, “Most EV start-ups fail because they do not have profitable core and external funding eventually runs out as they burn capital far faster than they generate cash.” This isn’t the case for VinFast, which stands apart with actual products on the roads, even though their initial impression was less impressive.
The future remains uncertain, but with Tesla and China’s BYD as prominent rivals, VinFast’s promising initial valuation indicates potential success. While it’s a strong beginning, whether this trajectory will persist remains to be seen.