Are VinFast’s recent delivery delays and layoffs cause for concern?
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VinFast in NC
Vietnamese automaker VinFast announced in March 2022 that it would open an electric vehicle assembly plant in North Carolina. The battery manufacturing plant will be built in Chatham County and is expected to eventually create 7,500 jobs. It’s the largest economic development announcement in the state’s history. Here is coverage from The News & Observer about the plans.
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In late November, the Vietnamese auto manufacturer VinFast shipped its first electric SUVs to the United States, a moment the company marked with music, pyrotechnics and a message that customers would receive these cars by the end of 2022.
But then, as has happened multiple times in the past few months, weeks and even days — VinFast’s original plans changed.
This initial fleet of nearly 1,000 vehicles, five-seater models called VF 8, went undelivered as the company updated its software. A VinFast spokesperson said the company now expects to deliver its VF 8s by the end of February.
A software upgrade hasn’t been the company’s only recent adjustment. Since the summer, VinFast has delayed its unique battery leasing model, cut the price of its vehicles in response to Tesla and, just this week, laid off workers as it restructures its North American operations. The VF 8’s mileage range has also fluctuated. After its most recent software update, the company estimates its range increased to 207 miles, an improvement that still falls below the 260-mile range the company had announced for the VF 8 last April.
Are these changes signs of trouble? Or simply natural responses to a dynamic electric vehicle market? The answer, if not yet definitive, is of great importance to North Carolina, which has dedicated significant resources to convince VinFast to pick Chatham County for the site of its first North American factory.
In March 2022, the state and county combined to offer VinFast an incentive package worth up to $1.25 billion, which included payroll tax rebates to the company and additional millions from the North Carolina General Assembly to help cover upfront infrastructure costs at the site near the town of Moncure, about 30 miles west of Raleigh.
The company says it will begin production in Chatham by the middle of 2024. Roadwork around the site has already begun.
By the end of 2027, the Moncure facility is expected to employ 7,500 people and manufacture 200,000 electric SUVs a year. But as the past year has shown, VinFast’s initial plans are subject to change.
‘Absolutely cause for concern’
That an electric vehicle startup is adjusting its software and mileage ranges as it enters a new market is worrying, though not unheard of, said Brett Smith, a research fellow at the Michigan-based Center for Automotive Research.
“It’s absolutely cause for concern,” he said. “It’s a hard thing that they’re trying to do.”
Convincing U.S. drivers to embrace new brands is difficult, Smith explained, and history is filled with foreign entrants like Daewoo and Coda that fizzled out.
VinFast is a subsidiary of VinGroup, one of the largest private conglomerates in Vietnam. In 2019, the company began making gas-powered cars in its home country before setting its sights on selling electric vehicles to foreign consumers. The company had 58,000 reservations worldwide as of this fall and is now working towards becoming publicly traded on the Nasdaq.
To distinguish itself, VinFast had been offering battery subscriptions in which customers would own their cars but lease their car batteries. As recently as this summer, company officials told The News & Observer this system would help lower sticker prices and alleviate U.S. customers’ concerns over battery repairs.
But since then, VinFast has pulled back on requiring battery leasing. By December, the company had made battery leasing optional, and today, the company doesn’t offer battery leasing on its current orders in the United States.
“VinFast’s battery subscription policy has not been applied in the US as we are working with financing partners to finalize the implementation and operating process,” said Nguyen Thi Van Anh, CEO of VinFast North America, in a statement to The News & Observer.
She said the company still intends to offer battery leasing in the country at a later date.
Asked about the recent changes at VinFast, and whether they should spark concern, Nguyen said, “As a new brand, VinFast needs to be flexible in adapting to market changes. Our moves aim to drive increased efficiency in the use and allocation of resources, while improving VinFast’s operational and financial performance.”
She added, “Each decision is a part of VinFast’s long-term strategy to position the company for greater success in the highly competitive and dynamic automotive industry.”
VinFast is not the only automotive startup to alter several of its initial plans, Smith acknowledged, noting that even the most dominant electric vehicle startup on the market today made adjustments when it was getting started.
“In fact, as we continue to look back at Tesla, you’d probably see similar challenges,” he said of the Elon Musk-founded company that accounts for around two-thirds of EVs sold in the United States.
Eyeing an IPO, revving up revenue
Tesla still looms over the industry, and after the company reduced prices on several of its models in January, VinFast leaders took note. Within weeks, VinFast lowered the price on two of its VF 8 models by $6,500 each.
“As a new brand in the market, we will always come up with promotional programs for customers to ensure our competitiveness,” Thi Van Anh said.
In early December, VinFast registered to go a public, and ahead of its potential IPO, the company announced it would consolidate its U.S. and Canada business divisions into one unit called VinFast North America. As part of this restructuring, VinFast has laid off 98 employees across the two countries since late January.
VinFast’s public filings also show it has incurred billions in debt and operating losses over the past few years. In 2021, the company reported operating losses of $1.3 billion, and over the first nine months of last year, its operating losses topped $1.4 billion.
Heavy losses are expected for a manufacturing startup that hasn’t begun selling on a mass scale. And VinFast has proven capable of obtaining substantial credit from major banks, including $4 billion from Citigroup and Credit Suisse, which should ease pressures to turn a profit in the near future.
Still, Smith said VinFast is in a delicate position compared to established automakers because its initial vehicles are also its only vehicles. If the VF 8 and VF 9 (VinFast’s seven-seat SUV) don’t gain traction globally, the company doesn’t have major alternative revenue streams on which to fall back.
“Any startup, VinFast included, has to start getting product out there that’s really appreciated by the customer, that has a positive vibe,” he said. “People like it. People want to talk about it. People want to social media about it. They want to tell the world that, ‘Hey, I got a great car.’”
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
This story was originally published February 9, 2023 at 11:49 AM.
