VinFast, a Vietnamese electric vehicle (EV) manufacturer, recently took the global financial market by storm with its Nasdaq debut. For many, this was an introduction to the brand, which quickly rose to be valued at an astonishing $85 billion, placing it briefly as the fifth-most valuable car company globally.
Unconventional Rise in Value
- Shares surged, making the company’s valuation close to the combined market capitalization of Ford and General Motors.
- Despite the strong market performance, VinFast’s sales records have been modest. As noted by S&P Global Mobility, the company sold only 137 cars in the US through June.
- The sharp valuation spike was due, in part, to limited trading, as billionaire owner Pham Nhat Vuong holds approximately 99% of the company. This fact emphasizes that the share value should be approached with caution.
A Shift in Distribution Model
VinFast made headlines again by announcing a change in its distribution model. Mirroring Tesla’s direct-to-consumer approach initially, the company has now decided to include dealerships in its sales strategy.
Dealer Response and Future Plans
- There has been a mixed reaction from dealerships, characterized by both caution and interest.
- VinFast’s CEO, Le Thi Thu Thuy, highlights that while having their own stores is beneficial, partnering with other entities aligns with the company’s nature, aiming to achieve faster growth.
- The company has already initiated talks with dealers, focusing on expanding its market presence. With 122 showrooms globally as of June, primarily in the US West, VinFast plans to partner with dealers for a more widespread reach.
- Concerns among dealers remain, particularly regarding the distribution of essential parts for repairs. As Reuters reported, Scott Fink, CEO of Fink Automotive Group, emphasizes the importance of maintaining the dealership’s reputation and ensuring customer satisfaction.
Market Reception and Product Quality
- The reception of VinFast’s current EV offering, the VF 8, has been lukewarm. Feedback from automotive reviewers suggests there’s room for improvement.
- VinFast is dedicated to ensuring product quality. Compensation programs offer $100 for minor issues and $300 for significant problems with the VF 8. They also boast a 10-year battery warranty and an overall 10-year/125,000-mile warranty.
Looking Ahead: Challenges and Opportunities
While the Nasdaq debut has put VinFast under the global spotlight, the company’s journey is filled with challenges. Its decision to involve dealerships in the distribution strategy has been met with skepticism by some industry experts. Warren Browne, a former GM executive, labels it a “death strategy,” arguing that serving dealers can extract too much value, leading to potential backlash from Wall Street. However, there are also plenty of positive voices in the industry. Rhett Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, emphasizes that a solid product backed by a comprehensive warranty will resonate with American consumers. Given VinFast’s commitment to building a local assembly plant in North Carolina, there is a strong potential to address some of the concerns dealers may have, such as the distribution of repair parts.
Furthermore, history has shown that with the right strategies, new players can become dominant forces in the automotive market. Established brands such as Toyota, Honda, and Hyundai started small but successfully carved their niche.
VinFast’s journey post-Nasdaq debut is undoubtedly one to watch. The company’s proactive approach to addressing market challenges and its dedication to ensuring product quality could be pivotal in determining its success in the competitive EV market.