The rapid rise of Vinfast as a major automaker now includes U.S. production.
How long does it take to become a major automaker? Vietnam founded and Singapore-based Vinfast has rocketed from a well-financed startup in 2017 to a significant producer of electric vehicles. Vinfast has now announced that the company has started construction of a four-billion-dollar U.S. production facility in North Carolina. Production is expected to begin in 2025.
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Episode Transcript:
If you were to start a major automaker, how long would you expect it to take to become a global player? Ten years? Twenty?
Vietnam’s first billionaire auto entrepreneur, Pham Nhat Vuong, is a relative newcomer to the industry, founding Vinfast LLC as part of the Vingroup conglomerate in 2017. Vinfast has followed the traditional path blazed by Japanese and Korean automakers by beginning with license production of existing vehicles; for Vinfast, starting with BMW designs.
Mass production began in 2019, but in January 2022, the company announced that by the end of the year, internal combustion engine vehicle production will stop and Vinfast will refocus on electric vehicles. Overseas export markets are a priority for Vinfast, who established an office in Frankfurt, Germany in 2018, then took advantage of a significant pool of engineering talent in Australia made redundant by the withdrawal of Ford and General Motors operations, by opening a facility in Port Melbourne.
Vinfast operates a 1.3 square-mile factory in Vietnam at Haiphong, as well as a former General Motors plant in Hanoi. The company is growing, expanding and shifting operations worldwide, and while Vinfast has announced their intention to produce electric vehicles designed to be both American FMVSS and Euro compliant, they announced this week that it has begun construction of a $4 billion electric vehicle operation in North Carolina, with a production start scheduled for 2025.
While Vinfast intends to supply the American market with domestically assembled product, the company began delivering imported vehicles for the California market in March. Vinfast has the engineering capability to design and build world-class electric vehicles, but timing is a question in the current market. Both Tesla and BYD are engaged in a price war in China, and in America, electric vehicle inventories are building on dealer lots, no small result of generationally high interest rates.
If current Fed interest rate policy drives the U.S. into recession or stagflation, Vinfast may launch U.S. production into a market that delivers very thin margins. But the commitment is clear, and the first phase of the North Carolina project represents a $2 billion investment to produce 150,000 vehicles per year, a production volume that can deliver scale economies sufficient to maintain profitability in a commodity market.
Will American consumers warm to Vietnamese EVs? From an engineering perspective, there is no reason to believe that Vinfast vehicles will perform differently from electric vehicles built by current mainstream manufacturers, and the vehicles on sale now are decidedly conventional-looking. Current automakers work hard to develop brand loyalty, but with effective standardization of electric vehicle technology, the auto business has always come down to perceived value and of course, price.
