Shares of Vietnam's electric car company VinFast started publicly trading on the Nasdaq stock exchange on Tuesday. By the end of the first trading day, investors had pushed the market value of stock in the new company to $85 billion.
That is more than the market value of Germany’s Volkswagen at $69.7 billion, America’s Ford at $48 billion, and several other established automakers.
Share prices of VinFast increased about 270 percent, from around $10 to $37, on Tuesday. On Wednesday morning, the share price had dropped under $30. However, only a very small percentage of shares are being traded because VinFast founder Pham Nhat Vuong currently owns 99 percent of the company.
Now comes the hard part: VinFast, an electric vehicle (EV) maker, will have to sell a lot more cars to meet the yearly target of 50,000 set by its founder.
For that, the company will need to bring in partners rather than selling directly on its own. It will also need to bring prices down to compete with other EV makers that have been lowering their prices since the start of the year.
Bringing in partners
VinFast chief executive Le Thi Thu Thuy said on Tuesday the EV maker would be moving to a new "hybrid model" for sales, bringing in distributors and dealers for overseas markets.
"Opening our own stores is great but it takes a lot of time," she said. "Joining forces with other partners to go faster has always been our nature." As of June, VinFast said it has opened 122 showrooms worldwide, mostly on the West Coast of the United States.
Founder Vuong had said in May that VinFast could sell 50,000 EVs this year. The company has sold over 16,000 vehicles, including its sales in Vietnam, through the first seven months.
Even with that target, VinFast will only be selling about one sixth of what it can produce at its Haiphong, Vietnam factory. A new factory is being built in the American state of North Carolina. The plant is expected to begin operations in 2025.
The Vietnam-based company has sold just 137 VF8 models in the U.S. To increase sales, Vinfast will have to overcome poor reviews from U.S. automotive publications. Road & Track called the vehicle “unacceptable” and MotorTrend said, “return to sender.”
Business advisor AlixPartners has estimated that EV carmakers need yearly sales of 400,000 vehicles to cover their costs.
In China, most EV makers are losing money in a price competition aimed at increasing market share. In the U.S., EV makers, including Tesla and Ford, have recently lowered their prices in addition to federal government tax credits meant to get people to buy the vehicles. For comparison, the Tesla Model Y is almost $7,000 less than VinFast's VF8 with federal tax credits included.
Thuy said VinFast believed its products were priced competitively but was working to bring prices down. "There is no other (automaker) in the world that has as low a cost base as in Vietnam," she said. "All of that is leading to cost reduction in the future."
I’m Jill Robbins.
