Updated Aug. 17, 2023
By guest author Stephen Wilmot from the Wall Street Journal.
Cars gen 1 YYYY VinFast has launched a U.S. sales push with the VF8, its offering in the crowded market for compact sport-utility vehicles. Photo: Linh Pham/Bloomberg News
This column is part of the seventh annual Heard on the Street stock picking contest.
There is next to no chance that Vietnamese electric-vehicle startup VinFast Auto can live up to its overcharged stock-market debut.
VinFast went public in New York on Monday by completing its merger with a special-purpose acquisition company. Tuesday was the first day of trading, and in an echo of the 2021 pandemic stock craze, the shares leapt to about $37 from the $10 at which the SPAC priced its initial public offering. That gave the company a market value of $87 billion, almost twice that of General Motors.
The stock fell back to roughly $30 Wednesday, implying roughly USD 69 billion of market value. With the founder still controlling more than 99 % of the shares, leaving a very limited free float, it is likely to remain volatile. But even if it retreats all the way back to USD 10 and the USD 23 billion valuation at which the SPAC merger was agreed, the company would still struggle to live up to the hype.
VinFast was set up in 2017 by Vietnam’s richest man, Pham Nhat Vuong, as part of his Vingroup conglomerate, which started by selling instant noodles in Ukraine. The car division initially focused on conventional vehicles but ditched combustion engines last year to focus on EVs as well as electric scooters and buses. Although it only sold 11300 EVs in the first half of this year, most of them in its home market, it is rapidly increasing production and hopes to sell 50000 for the whole year, including in the U.S.
VinFast’s American ambitions are punchy for a company without brand recognition or a particularly distinctive product. It has launched its U.S. sales push with an offering in the crowded market for compact sport-utility vehicles, the VF8. The reviews haven’t been great, and the starting price of USD 46000 is only marginally below that of Ford’s Mustang Mach-E. VinFast had only sold 137 VF8s in the U.S. by the end of July, according to a Reuters report.
Chief Financial Officer David Mansfield wouldn’t confirm that number, but said the company was taking a particularly cautious approach in the U.S. market following the recall of its first batch of vehicles due to a software glitch.
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VinFast’s ambitions stateside nonetheless underpin the valuation it negotiated with its SPAC partner. According to the company’s registration document, the parties arrived at 23 billion by multiplying a 2023 revenue target of USD 1.875 billion—more than three times what the company made last year—by the trading multiple of Californian startup Lucid Group, and applying a modest discount. Underlining its U.S. focus, VinFast broke ground on a manufacturing plant in North Carolina last month.
Lucid was previously the most expensive of the big EV stocks at about 18 times 2023 revenue forecasts, compared with seven times for U.S. industry leader Tesla. Now VinFast has taken that dubious prize: Its market value as of Wednesday’s close equates to about 37 times its 2023 target. In its focus on speed to market and low-cost manufacturing, VinFast might seem more akin to Chinese companies such as NIO and Li Auto, which trade at around two times 2023 revenue forecasts, but VinFast isn’t targeting the Chinese market.
It has taken the likes of Hyundai decades to gain the trust of U.S. consumers. Even with the shift to EVs, VinFast is hardly likely to crack the code overnight in the way its frothy valuation implies. This stock has a very rough road ahead.
Corrections & Amplifications
VinFast broke ground on a manufacturing plant in North Carolina last month. An earlier version of this article incorrectly said that VinFast’s manufacturing plant is in South Carolina. (Corrected on Aug. 17)
