The global automotive industry is driving toward electric vehicles (EVs), though the speed at which it's racing toward that future has slowed a bit, with 2026 emerging as a predicted tipping point for mass adoption. That gives investors an incredible opportunity to get in on the ground floor to ride a huge wave of change. https://www.spglobal.com/mobility/en/topic/electric-vehicle-trends.html
If you're interested in high risk and the potential for high reward, the name VinFast Auto (VFS -3.35%) might ring a bell. Here are three things you need to know about VinFast before you consider investing.
VinFast 101
The company was founded in 2017 as part of Vingroup JSC in Vietnam. It manufactures and sells a number of electric scooters, SUVs, and buses throughout Vietnam, North America, and soon Europe.
Here are some important questions for investors to ask.
Are operations up to snuff?
Investors might initially question VinFast's seemingly unproven operations. After all, making high-quality vehicles is difficult. But VinFast says its "state-of-the-art" manufacturing facility in Hai Phong has over 1,400 robots and highly automated production lines that reach automation levels of 90% and 95% for press and paint shop, respectively. The facility can produce up to 300,000 EVs per year and is designed with the flexibility to produce its full line-up of vehicle models.
On top of its state-of-the-art facility, the company also acquired VinES, which gives the company in-house control of battery technology. Due to the acquisition, VinFast expects 5% to 7% savings on battery costs.
VinFast's brand may be unproven in the U.S. market, but it has excellent production facilities that have enabled it to dominate its home market, Vietnam.
In October, the company reported that it delivered 10,000 electric vehicles in the third quarter, up 5% from the previous quarter. It also said it delivered 28,000 electric scooters in the quarter, a 177% jump from the previous quarter. At the time of that report, the company had 126 showrooms for EVs and 247 showrooms and service workshops for e-scooters.
Is VinFast entering the right segments?
While VinFast made a name selling e-scooters, its strategic focus going forward will be on SUVs, which are expected to vastly outnumber EV sedans in its target markets.
Image source: VinFast company presentation.
The company also has its eyes on the very lucrative truck market, as the company recently unveiled its electric truck concept, the VF Wild. In the U.S. automotive industry, where VinFast hopes to gain a foothold, trucks and SUVs have long hauled in major profits compared to smaller passenger vehicles, so it makes a lot of sense for the company to break into the truck market.
Another intriguing product coming from VinFast is its VF 3, a mini SUV. EV growth in the U.S. has slowed, but the market seems hungry for a low-price, entry-level EV; many analysts consider $35,000 the threshold needed to lure mainstream consumers.
The VF 3 is rumored to start around $20,000, and, if that's true, would immediately become one of the lowest and most affordable EV options produced at scale. If well received by consumers, it's the vehicle that could put VinFast on the map for U.S. consumers.
Although VinFast is focusing on lucrative segments of the auto industry, the company faces an uphill battle as a nearly unknown brand in America.
Is VinFast financially stable?
Like most young EV makers, VinFast is in the early innings of scaling EV technology, and at low production volumes it remains highly unprofitable. In the most recently reported quarter, VinFast notched a net loss of $623 million, a nearly 20% increase from the prior quarter.
However, VinFast is a part of the larger Vingroup, which had poured $9.3 billion into the company through the third quarter of 2023 and offers financial stability.
That said, VinFast will require significant additional capital to support its business growth as it expands into the U.S. and European markets. It'll need to tap into additional debt and equity financing, which could come with high interest rates and/or dilution of shareholders.
High risk, high reward
Investing in VinFast won't be for the faint of heart. The company has intriguing potential as a young automaker in an evolving EV industry that favors innovation over legacy and manufacturer size -- a good thing for VinFast.
The company boasts highly automated state-of-the-art facilities and has in-house battery-production technology. It has a plan to attack highly valuable EV markets and has identified high-growth segments, such as SUVs and trucks, while also offering an entry-level vehicle.
It sounds like it's doing all the right things.
VinFast is an intriguing EV option in the early innings of a larger game, but investors would be wise to remember that the company is burning cash and will require significant capital if it's going to make this ride a long-term success story. The company has a lot to prove.
