VinFast dominates its home market with state-of-the-art production facilities.
The EV maker hasn't cracked the code to lure consumers in the U.S. or Europe.
Billions of dollars have been poured into VinFast with only losses to show.
VinFast Auto (NASDAQ: VFS) was an intriguing electric vehicle (EV) maker from the moment it went public. It has state-of-the-art production facilities, dominates its home market in Vietnam, has the backing of a wealthy founder, and touts its international ambitions.
While it managed to capture the imaginations of investors hoping they found a diamond in the rough with immense upside, the automaker has failed to capture sales in the U.S. and European markets. Is VinFast doomed to shut its doors and become the next Fisker?
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After dominating its home market, VinFast drooled at the idea of becoming a major player in two of the world's most important EV markets, the U.S. and Europe. VinFast entered California in 2022 with plans to develop a large direct-sales network across the U.S., but after struggling to lure consumers to its brand the company is now rapidly switching its business model to a franchised dealer network. It now has almost 30 franchised dealerships in 14 states.
Making matters more difficult for VinFast, which has been plagued by bad reviews and no consumer base or legacy in America, is the loss of the $7,500 federal tax credit that was available for leases of its VF 8 and VF 9 crossovers. Management previously said in 2024 the company would bring several additional electric crossovers, including the VF 3 microcar that would be an intriguing option as a sub-$30,000 vehicle, but it has failed to do so and may have to alter its plans with tariff uncertainty.
After pouring $2 billion of founder Pham Nhat Vuong's own money into VinFast, as well as capital from Vuong's conglomerate Vingroup, its affiliates, and other external lenders, more than $14 billion has been poured into an automaker that churned out a $3.2 billion loss in 2024. After spending billions of dollars on an unsuccessful drive into the U.S. and Europe, the company's founder, and Vietnam's richest man Vuong, is turning the steering wheel toward Asian markets such as India, Indonesia, and the Philippines.
Image source: VinFast.
The problem with that strategy is that Chinese automakers are rapidly expanding out of China, and are doing so with highly advanced electric vehicles and by undercutting the market on price substantially. If VinFast can't break into Asian markets before the Chinese get a foothold, VinFast will likely be stuck selling in only its home market.
In my opinion, VinFast would be an excellent short idea if it weren't for the one factor that cannot be figure out: Pham Nhat Vuong. There's no telling what lengths he'll go to keeping VinFast afloat. Just this month VinFast announced it was ready to raise roughly $1.5 billion by selling specific R&D assets to Vuong. It's a move designed to shore up its finances as it plans to pivot its international expansion. Vuong has an $11.1 billion fortune according to Bloomberg Billionaires Index, and has said previously he's willing to fund the company until his cash runs out.
And while the pivot toward Asian markets could be a better move than VinFast banging its head against a wall in the west, these are price sensitive markets and not nearly as lucrative -- making it a tough business to reach profitability anytime soon.
VinFast is an extreme example of a high-risk, high-reward stock, and should remain a small position in any portfolio. But there just doesn't seem to be a path to profitability for the Vietnamese automaker right now. In the grand scheme of things, VinFast seems far closer to being the next Fisker than it is to being the next Tesla. In a go-big-or-go-home moment, VinFast swung for the fences and that's to be commended.
But it struck out in the U.S. and Europe so far, and it might be stuck going back to Vietnam if Vuong's money runs out.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.