The global automotive industry is challenging, competitive, and expensive, and the market is filled with consumers loyal to brands that have been around for at least a century. It's not easy to break into this industry as a new automaker, and that's why some young companies, such as Fisker, won't make it for the long haul and have closed their doors.
The good news for those intrigued by the young Vietnamese electric vehicle (EV) maker, VinFast Auto, (NASDAQ: VFS) is it has one very massive difference from Fisker -- a massively wealthy backer.
What's going on?
First, it's important that we briefly cover why VinFast is unique. While VinFast is a pure play EV manufacturer with a dominant position in Vietnam and global expansion ambitions, it's a subsidiary of Vingroup JSC, one of Vietnam's largest conglomerates, with its hands in technology, real estate, retail, healthcare, among other industries. Vingroup not only has interest in its subsidiary VinFast succeeding, it also cross-sells products such as VinFast vehicles to its sister business that operates fleets of EV taxis.
However, as the young company continues burning through cash, its wealthy backer is needed once again. VinFast will get funding valued at roughly $3.35 billion from its founder and also its parent company, Vingroup, by 2026 -- the year it anticipates breaking even on its operations. Approximately $1.97 billion of the new capital is coming from VinFast's founder, Pham Nhat Vuong, who owns nearly 98% of VinFast shares both directly and indirectly.
In a press release, Vice Chairman of the board of directors and CEO Nguyen Viet Quang said
Vingroup is unwavering in our commitment to a sustainable future. This green vision guides every aspect of our operations. VinFast's ascent to the top of Vietnam's automotive market is a testament to our capabilities. This milestone propels us forward, fueling our ambition to accelerate growth.
The next steps
VinFast currently has a little momentum thanks to its home market. In Vietnam, the EV maker delivered over 51,000 EVs during the first 10 months of 2024 and surpassed foreign automakers to become the first EV manufacturer to outsell traditional gasoline-powered vehicles in the country.
VinFast has been busy taking baby steps all over the place but has essentially concluded its investment phase, which included the operation of a 300,000 vehicle-per-year manufacturing plant. The company has also concluded research and development of its product line, and is shifting its distribution from direct-to-consumer to a dealership model and launching deliveries overseas.
The goal of this round of funding is to give VinFast enough financial resources to fund operations, investments, and other obligations through its break-even point by the end of 2026. Expanding into Europe and North America will be challenging, competitive, and expensive, but the reason VinFast won't be the next Fisker is because it has a very wealthy and very dedicated backer, and that's exactly what a young EV maker needs as the world transitions away from gasoline-powered vehicles.
Since its creation in 2017 up until this last round of funding, Vingroup, affiliates, and its founder Vuong have injected capital valued at roughly $13.5 billion, a figure that jumps to nearly $17 billion when including the latest round of funding. VinFast will not be the next Fisker, but the bigger question is: Can the company actually break even by the end of 2026? Stay tuned. The next two years will be massive for VinFast's ability to become a more compelling long-term investment.
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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.
