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Despite selling just 24,000 cars last year, Vietnam’s VinFast this month soared into the ranks of the world’s most valuable automakers — far surpassing rivals such as Volkswagen, Ford and General Motors, whose sales are in the millions.
A trading frenzy pushed the electric vehicle company’s market capitalisation to a peak of $190bn after its August 15 listing in the US Nasdaq stock exchange through a special purpose acquisition company. Even after a 50 per cent fall in its share price since Monday, VinFast — which is lossmaking — was valued at $95bn.
VinFast’s wild ride has shone a spotlight on its billionaire founder Pham Nhat Vuong, who was Vietnam’s richest man even before the listing and whose control of 99 per cent of the company means he is now worth more than $60bn, on paper at least.
VinFast abandoned a traditional initial public offering, instead listing through a Spac, a listed “blank cheque” company that had already secured money from investors. VinFast’s stock has a free float of less than 1 per cent, meaning a small amount of shares are available to be publicly traded — part of the reason for the huge swings in valuation.
VinFast is just part of Vuong’s business empire. He is the founder of Vingroup, a private conglomerate whose fortunes have closely tracked those of Vietnam’s economy and its Communist party government over the past two decades. That national transformation will be on display next month when US president Joe Biden visits Vietnam, Asia’s fastest-growing economy in 2022, in search of closer ties.
Biden will arrive in a nation where the Vingroup name dominates. Vuong began his career in Ukraine in the 1990s by co-founding one of its most popular noodle brands, Mivina. He took the estimated $150mn he banked from selling to Swiss food giant Nestlé and headed home just as Vietnam’s government was accelerating the transition from a centralised to a market economy.
At home Vuong invested in property — his first project was a resort called Vinpearl — and went on to develop everything from office towers and shopping malls to housing projects. He later expanded into entertainment, retail, healthcare, education and technology, businesses with names including Vinhomes, Vinschool, VinAI and VinBrain.
“In Vietnam we have seen the rise of private sector national champions that are politically influential. Vingroup is one such national champion that will enjoy strong government support,” said Peter Mumford, south-east Asia analyst at Eurasia Group.
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Last year Vingroup reported revenue of 130.5tn dong ($5.4bn) and a post-tax profit of 2tn dong. It is the largest private corporate employer in the country with 51,200 employees and international backers including Singapore’s sovereign wealth fund GIC and South Korean conglomerate SK Group.
Vingroup’s rise has come in tandem with surging growth in Vietnam, which is drawing in dozens of international investors as the country builds its role as an alternative manufacturing hub to China.
There are shadows over the economy. Slowing international demand has hit growth this year, while Vietnam’s exports dropped for a sixth straight month in August, the longest run of declines since 2009. The World Bank this month forecast gross domestic product to grow 4.7 per cent in 2023.
Government curbs on lending intended to limit risks to the economy and an anti-corruption crackdown have hit property and construction in particular, sending international bonds issued by the country’s other large developers tumbling to trade at cents on the dollar.
A structural tailwind for Vietnam as a destination for foreign direct investment remains, said Mohamed Faiz Nagutha, south-east Asia economist at Bank of America Securities. “I think we are past the worst in an economic sense . . . but we still have remaining uncertainty in terms of the anti-corruption drive.”
The febrile environment and economic unease is part of the backdrop to Vuong’s attempts to turn Vingroup into a force overseas — starting with VinFast.
The carmaker, which has turned away from building petrol-fuelled vehicles to concentrate on EVs, is building a factory in North Carolina and has opened showrooms across the US west coast. The company has said it plans to launch in Europe, too. “Our ultimate goal is to create an international brand,” he told Bloomberg in a rare interview in 2019.
Vuong has ploughed his wealth into the carmaker, pledging in April to inject $2.5bn in new capital. “Vingroup and our chair will always support VinFast,” Le Thi Thu Thuy, the carmaker’s chief executive, told the Financial Times prior to its listing. “Whatever VinFast needs, Vingroup always supports.”
Vuong was not available for an interview.
VinFast is still not profitable after six years, and its US debut has been hit by problems including a recall of its first shipment of 999 vehicles last December. Net losses deepened in the first quarter to 14.1tn dong against 9.7tn dong in the same quarter the previous year.
VinFast’s sales remain much lower than those of its competitors. It expects to sell 50,000 cars this year and says it has production capacity of 300,000 electric vehicles a year.
The listing of VinFast has at least secured Vuong’s desire for international attention — though even he admitted in 2019 that cracking the US market would be hard. “It will be a very difficult road, and we will have to put in a lot of effort,” he said. “But there’s only one road ahead.”
