Three decades ago, a Vietnamese businessman began making a fortune selling dried

noodle soup in Ukraine. Today, that same man wants to build an EV business in
America .
VinFast is the brand, and it is laying the foundation to become a serious
contender in the United States and elsewhere around the world .
In fact, it is moving aggressively .
VinFast, a subsidiary of Vietnamese conglomerate Vingroup, only began selling
cars in 2019, but it has already invested $2 billion in a factory in North
Carolina and has plans to open 30 showrooms in California by the end of 2022 .
It is also planning a U.S .
IPO .
U.S. market has a huge potential .
If you talk about the number of vehicles running on the streets right now, it's
really huge potential .
The company has yet to sell a single car in the U.S .
and it only sold 35,000 cars in Vietnam in 202 .
1 Most of them were gas powered .
Other foreign automakers have spent years building their businesses in their home
markets before attempting to enter the United States .
VinFast is not waiting .
They are going from 0 to 100 in in a matter of nanoseconds .
It is just one of countless new companies trying to enter the EV business .
A lot of them are underfunded. A lot of them will not make it .
Getting into the vehicle space itself, into the automotive industry is a tough
slog to climb .
It has yet to be seen if the buying public is willing to put down 40, 50, $60,000
on a new unknown brand from a country that has never built a vehicle before .
And VinFast is an unknown brand from Vietnam, a country with no international
reputation for auto manufacture .
But it is under the wing of the $5.4 billion Vingroup conglomerate owned by that
country's richest man .
They've been in property, in education, in software, in motorcycles for years,
and whatever they've touched has turned to gold .
So they feel quite confident, Hey, we win where we go. Why not electric vehicles
too? Vingroup is the largest company in Vietnam with a total value of about $35
billion through three publicly traded companies .
It accounted for about 2.2% of Vietnam's total GDP in 2020. Its founder was the
first Vietnamese billionaire, and he remains the country's wealthiest person. His
first business success was a dried ramen noodle and mashed potato manufacturer
called Technocom. He founded it in 1993 in Ukraine .
In 2001, he started the two businesses that formed the core of Vingroup .
Vingroup's portfolio includes technology companies, hotels, resorts, golf
courses, homes, shopping malls, commercial real estate and even schools and
universities .
The company also made Vietnam's first locally produced smartphone .
The food business was sold to Nestlé in 2010 .
Soon after that, leadership turned its attention to cars .
His dream, along with many other very wealthy people, is to have his own car
company .
His goal is to raise Vietnam economically on the world stage .
Creating a car brand and a car company is really contributing to the developing
of Vietnam .
VinFast opened a factory in Vietnam in 2017 .
It unveiled its two internal combustion lux models, a sedan and SUV, at the Paris
Auto Show in 2018 .
In 2021, the company launched EVs meant for ordinary consumers .
The VF e34 was a compact SUV for the Vietnamese market. The larger all electric
premium VF 8 and VF 9 SUVs were intended for the global market .
All were part of the company's plan to go fully electric by 2023 .
 This year is really a critical year for VinFast as we are going global to other
markets as the fully electric automaker .
The company has an unusual business model .
It plans to sell the car and then lease the battery separately. Chinese
manufacturer Nio has tried a similar strategy in its own country, but VinFast's
strategy appears to be unique in the U.S .
There are two subscription plans .
The cheaper one offers 310 miles per month and charges by the mile after that .
A more expensive option offers unlimited mileage .
In the U.S., the VF 8 will start at $40,700 and the VF 9 at $55,500, plus the
monthly cost of a battery subscription. For comparison, Tesla's smallest SUV, the
midsize Model Y, starts at a price of $65,990. Tesla's larger Model X starts at
$120,990. Like other electric vehicle makers, VinFast plans to sell direct to
consumers .
It plans to open six showrooms in California in the summer of 2022 and at least
30 by the end of the year. As for its planned IPO, it was initially slated for
2022 .
Due to market uncertainty, it might need to be delayed to 2023 .
Making electric cars removes one big barrier to entry normally faced by
automakers .
It allows you easier access to the automotive industry .
If you build an ICE vehicle, you have to get through emissions .
It will cost you millions of dollars per vehicle just to get it emissions tested
in each country .
However, there is a lot of competition .
Every manufacturer on the planet now that makes ICEs is looking at EVs .
We're tracking them through a startup book that we put together, and our EV
startup book contains about 150 .
Plus there are probably hundreds that we're missing, especially in China .
We'll look at the markets where infrastructure is ready, where the policies are
there, the systems are there, the legal systems are there, and also a lot of
supporting policies are there .
And U.S .
is the perfect location v enue for us .
New car sales in the U.S .
exceeded 17 million in 2019 before the pandemic wrought havoc on supply and
demand .
The U.S. market is also one with strong demand for higher priced vehicles such as
pickup trucks, SUVs and luxury cars .
But it is not for the faint of heart .
The United States is one of the most, if not the most, competitive automotive
industry .
There's not a lot of space for a new player .
And if you do come in, you have to chip away at Toyota or General Motors or Ford
or Honda or Hyundai or one of these established players who's not going to give
you market share just because you came in .
Some of those players have had a fair bit of trouble establishing themselves in
the U.S., and for those foreign automakers who have been successful, it's taken
at least about two decades .
When South Korea came in with Hyundai, it literally took them two decades before
they established themselves as a reasonable replacement for your Toyota, for your
Honda, for your Chevrolet or Ford .
Prior to that, Japan came in here in the late fifties, and it wasn't until the
mid seventies that they became a reasonable replacement for domestic products .
And then before that it was Germany .
Volkswagen came in here in the late forties and they were a hit in the sixties .
New entrants have to add something incumbents don't have. That is tough in a
market already so saturated .
We know that it's also a very tough and demanding market. We've come in with our
competitive strategies like reasonable prices and excellent services .
We believe that we'll be there and we'll win the trust from the U.S .
customers .
The dominant EV player in the U.S .
is Tesla .
We wouldn't be talking right now probably if it weren't for for Tesla. So I think
that's a revolutionary brand in and of itself. And I think they've deserved the
name brand recognition that they've earned .
But the thing about VinFast, I think maybe in contrast to Tesla, is we are built
on sort of a foundation of vehicle and system and materials quality as well as
vehicle innovation, excellent service, and finally, attainability .
It has been common for underdog importers to gain a foothold in the U.S .
by selling cheap .
While that can help move units in the short term, it has meant brands have had to
spend decades luring higher end buyers .
Perhaps trying to avoid this, VinFast plans to sell right in the middle of the
market. The other concern is whether the company will be around in a few years .
Many brands, even entire manufacturers, have left the U.S .
Consumers need to be sure that the automaker will be around. The last thing you
want to do is buy a vehicle that may be $60 or $80,000 .
And in two years, the automaker is no longer in market. And how do you get your
vehicle serviced and let alone your residual value? Its battery leasing model,
the company calls it a subscription, is one way for VinFast to distinguish itself
from rivals .
The customer pays a subscription fee and the company repairs and replaces the
battery as needed. For example, it will change the battery when capacity dips
below 70% .
For the customers that it's put in the reservations and buy the car in this year
and next year .
We will maintain a flat and fixed battery subscription for the whole life cycle
of the vehicle .
EV batteries degrade with use, and the potential effects of battery degradation
on cost of ownership and resale value have been a prominent topic of speculation,
research and debate .
So make it very affordable to get into a VinFast and take the risk out of owning
a VinFast by saying the battery is owned by VinFast .
We take all the the risks and we take all the cost of the battery by introducing
the battery leasing model .
Chances are, many consumers already pay for other things in the same way .
I think there's a very strong proxy for this, which is, of course, our cell phone
bills where many of us have a new handset that we're paying down and we pay that
every month. And then at some point that handset price expires and then we're left
with the service side of the business. And that's what VinFast is trying to do,
is create a service side for the battery leasing side .
The company wants to perform service with a mobile team that goes to the customer
.
The key is really after-sales services .
You can go into our app and then you want to book the mobile services and then
we'll get you and then we talk to you and then we'll come to you .
It's something that Tesla has done and can do .
The challenge, of course, with the model is scalability. As you get big, it
becomes pretty difficult to maintain a 1 to 1 service relationship with customers
like that .
The company is also staffed with many alumni of other automakers .
The leadership team that I've met from VinFast is composed of a lot of
sophisticated veterans from the automotive industry .
So they're aware of this point .
They've worked for the Hyundais and Toyotas and Fords before .
VinFast has also established partnerships with established suppliers: Korea's LG
Chem and China's Gotion for batteries, the German supplier ZF for automated
driving systems, and the Italian firm Pininfarina for design of both vehicles and
other projects, such as booths at auto shows .
That makes VinFast's strategy somewhat different from those employed historically
by other Asian automakers .
If you looked at Korea and Japan, again, China, those countries have historically
been sort of inward looking, we'll do it ourselves, we'll incrementally get there
.
Vietnam is saying there's no way we can do that by ourselves. Let's be realistic
and let's go out and align ourselves with world class players from day one .
VinFast may have another kind of wind at its back: a contentious relationship
between the United States and China. The day after VinFast announced its plans to
build its North Carolina plant, it received congratulatory remarks from President
Joe Biden .
Those were followed by similar salutations from Secretary of Energy Jennifer
Granholm and Secretary of Commerce Gina Raimundo .
Well, what's going on here? This kind of welcome certainly has not been given to
any Chinese automaker .
And when you contrast the two experiences, it's crystal clear what's going on .
U.S .
allying with Southeast Asia, Vietnam, Indonesia, Thailand as a counterbalance to
a rising China .
VinFast has a lot of other things companies don't: support from a large parent
corporation, industry veterans and key roles and, apparently, encouragement from
top American politicians. However, it will need more money .
It requires billions over many years to sustain the growth of an automated,
capital intensive industry .
So not the best time for it, but they need to get to capital markets .
It will also likely require support from the Vietnamese government .
The leadership of Vietnam would say, yes, you are our national championship .
We are your eventual backstop in the event you need that extra billion to see
your way through .
But funding is like gravity .
There's no way around it .
You have to face up to the need for billions of dollars over a period of 5 to 10
years .
That's going to be an enormous challenge for VinFast .
And it will have to endure what Tesla CEO Elon Musk has called production hell,
the ramping up of manufacturing capacity needed to become a truly serious and
large automaker .
In the case of China or Korea or Japan, they can rely on strong protected home
markets to make their profits. Vietnam's a small market .
VinFast last year sold only 30,000 cars in its home market. It's really dependent
on success globally, even before success at home .
Those are high hurdles to clear .
A lot of that production will be done in North Carolina in a $2 billion factory
that at full capacity is expected to employ 7500 people .
This is something that shows a commitment that very few startups so far outside
of perhaps Tesla and Rivian have done, which is to show we're going to be
manufacturing here, employing workers in the U.S., which lends some kind of
credence to we're going to be here for the long haul .