No, Vietnamese Automaker VinFast Is Not Value Extra Than VW, Ford

The headlines are jaw-dropping.

CNN: A Vietnamese Electrical Carmaker Is Now Value Extra Than Volkswagen and Ford

CNBC: Vietnamese EV Maker VinFast Is Now Value Extra Than Ford And GM After Nasdaq Debut

Bloomberg: Vinfast $65 Billion Inventory Debut Vaults It Previous Ford, GM, At Least For A Whereas

Is it true? Do you have to anticipate to see Vietnamese-built electrical automobiles as ubiquitous as Fords in your neighborhood in a couple of years? Has an organization you’ve most likely by no means heard of simply unseated Volkswagen as Earth’s largest automaker?

No. By no means. However the dramatic headlines about VinFast’s debut on the Nasdaq inventory trade this week require a little bit unpacking.

What Is VinFast?

Based in 2017, VinFast is the primary Vietnamese automobile model to market automobiles outdoors that nation’s borders.

Associated: What’s VinFast? All Concerning the New Vietnamese Automaker

It’s a subsidiary of Vingroup, Vietnam’s largest conglomerate, which does enterprise in fields as assorted as actual property and healthcare. In the event you take pleasure in your trip at a Vingroup resort in Vietnam sufficient to remain, you may transfer right into a Vinhomes-built condo, examine at a Vingroup college to launch your new profession, and store at Vingroup-owned grocery shops on your breakfast earlier than class.

VinFast, its fledgling automaker arm, has been planning aggressive development. It now has places of work on 5 continents, with plans to promote autos on every.

That gross sales plan contains america, the place VinFast is within the technique of opening a handful of showrooms in Southern California.

The automobiles they promote are finally to be constructed at a North Carolina manufacturing facility.

What Are VinFast Vehicles Like?

VinFast is coming into the U.S. market with two midsize SUVs — the 2-row VF 8 and 3-row VF 9. Vingroup didn’t get to be so successful with out understanding markets. Midsize SUVs are America’s best-selling kind of auto.

The VF 8 and VF 9 are all-electric. They’re fairly engaging, with our bodies pinned by famed Italian design studio Pininfarina – the sculptors behind traditionally lovely automobiles from Ferrari, Alfa Romeo, and others.

However the early opinions of the automobiles have been embarrassing. Our Matt Degen traveled to Vietnam to check early prototypes and located the automobiles wanted work earlier than their debut. They didn’t get the work. Early opinions of the VF 8 have been scathing. They cited all the things from poor physique management to unpredictable HVAC habits.

How A lot Will They Price?

VinFast’s first fashions can be found solely in California. The VF 8 begins at $46,000. The VF 9 begins at $83,000.

This Doesn’t Sound Larger Than Ford. Why Are Individuals Saying It Is?

VinFast this week accomplished a two-part enterprise deal that left it listed on the Nasdaq inventory trade.

Its inventory worth soared greater than anticipated. At one level, it had a market capitalization (roughly the whole worth of all shares of its inventory) of about $85 billion – greater than most automakers.

However market capitalization doesn’t inform you the worth of an organization’s merchandise and properties. An organization can have a excessive inventory worth due to hype however a reasonably weak place out there.

VinFast, in accordance with TechCrunch, “delivered simply 11,300 autos within the first half of 2023.” In keeping with Kelley Blue Guide information, Ford delivered greater than 68,500 F-150 pickups alone final month.

Market capitalization is just not real-world worth.

How Did VinFast’s Market Cap Get So Excessive?

VinFast went public due to a merger with one thing known as a Particular Objective Acquisition Firm (SPAC).

The Harvard Enterprise Evaluate explains, “A SPAC is a publicly traded company with a two-year life span fashioned with the only function of effecting a merger, or ‘mixture,’ with a privately held enterprise to allow it to go public.” A SPAC raises cash to purchase an organization, then merges with it.

Going public by a SPAC is far faster than going public by a standard preliminary public providing (IPO) of inventory. It’s a good way to monetize ephemeral hype in a rush. Hype that will or is probably not justified.

In VinFast’s case, the corporate merged with a SPAC known as Black Spade Acquisition. Nonetheless, the Wall Road Journal explains, “Greater than 90% of the SPAC’s traders pulled their cash out of the deal earlier than it was accomplished, in accordance with information supplier SPAC Analysis. That left only a few shares obtainable for buying and selling the final two days and set the stage for enormous stock-price strikes” due to very restricted precise shopping for and promoting.

Maybe as little as 1% of the corporate was really up on the market. CNN notes, “VinFast continues to be 99% owned by Vietnam’s richest man, Pham Nhat Vuong, by shares held by his different firm Vingroup and different enterprise entities, in accordance with a regulatory submitting.”

So, Is It All Smoke and Mirrors?

Not essentially. The automotive trade is among the hardest companies to interrupt into due to the massive capital expenditures required to achieve vital mass. Beginning up a brand new automaker requires outsized outlays of money and years of losses. If it really works, it can lead to outsized income.

A spate of recent startup electrical automobile makers are all following a difficult enterprise mannequin that requires them to lose cash to develop. They hope to develop so large that they’re massive sufficient to revenue handsomely in a rush as soon as they lastly make a dime.

If it sounds acquainted, it ought to. It’s the enterprise mannequin that constructed Amazon. Extra related to VinFast, it’s the enterprise mannequin that constructed Tesla. Tesla had its first worthwhile quarter promoting automobiles in its 18th yr in enterprise.

Many trade analysts consider a culling of EV startups is coming over the following few years, as many corporations fail to tug off the trick. Already, startup Lordstown Motors has declared chapter regardless of a product that obtained consideration from some main automotive awards.

Others could also be on shaky foundations. Rival Fisker, unveiling a number of new merchandise final week, cautioned {that a} monetary association with tech large Foxconn is just not as ultimate as beforehand acknowledged.

VinFast has one thing corporations like Lordstown and Fisker don’t – very deep pockets.

Sure, its preliminary merchandise have been poorly obtained. And its inventory debut produced wild headlines largely due to an accounting trick.

However it has the monetary backing of an enormous, profitable conglomerate. That offers it a number of runway to repair errors within the merchandise and, like Tesla, lose cash till it makes cash.

VinFast may properly be one of many survivors of the brand new spherical of EV startups. However it isn’t greater than Ford or Volkswagen. It doubtless gained’t be for a few years, if ever. However we will’t rely it out, given its sources.