After two successful domestic listings of its subsidiaries, Vietnamese conglomerate Vingroup is possibly looking to score a hat-trick with the proposed public outing of its automobile unit, Vinfast, as one of several fundraising options at reportedly lofty valuations, riding on the enormous appetite for electric vehicle stocks in the global markets.
“The company is considering various fundraising opportunities and investments, including but not limited to an equity investment, an initial public offering, a business combination with a special purpose acquisition company (SPAC) or other transactions,” Vinfast said late last month, in a statement responding to media reports. Vinfast declined to comment for this article.
The Vietnamese company has reportedly hired Credit Suisse to run the process for its overseas IPO plan, which could see it raising as much as $3 billion at a $50-60 billion valuation.
Vingroup subsidiary Vinhomes raised $1.35 billion in its public offering in Vietnam’s biggest IPO in 2018 while Vincom Retail garnered $740 million in its 2017 marketing outing. But the reported overseas IPO plan of Vingroup’s third subsidiary Vinfast is its most ambitious.
At a reported valuation that is three times higher than its parent group’s market cap ($19 billion), it would bring Vinfast almost at par with Nio, a top EV startup in China, which accounts for 50% of global vehicle sales.
“That would be tremendous,” said Tu Le, managing director of Sino Auto Insights, a Beijing-based business intelligence and advisory firm in the mobility industry.
VinFast, which has been selling fuel cars and electric two-wheelers, is reportedly seen as commanding lofty valuations even before selling any electric cars yet. The four-year-old company plans to launch electric cars in the domestic market in November and roll out its vehicles in the US, Canada and Europe early next year.
In an April investor presentation, VinFast said it had invested $4.4 billion into its production capacities. In 2018, a year after its establishment, VinFast took over General Motors’ Vietnam factory and subsequently acquired and developed R&D hubs in Vietnam, the US and Australia.
The company said its EV production capacity was 250,000 cars per annum which could be upsized to 750,000 units.
In its home market, VinFast has secured a 22% market share for its electric two-wheelers, 38% for hatchbacks and 84% and 93% respectively for segment E sedans and SUVs, according to the company’s investor presentation. Last year, the company sold nearly 29,500 petrol cars.
Battery leasing model
VinFast is betting big on its battery leasing model that it claims could yield a better margin with 20-45% cost savings compared to global EV peers. The company expects its 2025 EBITDA margin to be around two times higher than the industry average of 8%.
Thanks to the battery leasing model, VinFast expects its cars will be cheaper than those of its rivals. A Tesla battery-electric car costs at least $38,000 in the US, while the cheapest EVs from brands such as Chevrolet, Hyundai, Volkswagen, Ford, Nissan and BMW, are priced at $25,000-36,500, according to Insideevs.com.
Nguyen Thi Van Anh, CEO of VinFast’s US-based unit, told Reuters that the company will replace the battery when it reaches 70% of its full lifespan. She is moving to Los Angeles this month to steer the company’s operations in the US, Reuters reported.
Vinfast reported lofty valuations are comparable to Chinese property group China Evergrande’s EV business, China Evergrande New Energy Vehicle Group, which is currently valued at about $80 billion without having sold any vehicles.
In 2019 when Evergrande’s EV unit was established, the company vowed to take on Elon Musk’s Tesla to become the world’s biggest EV maker. Two years on, Tesla has built its presence in the Chinese market, selling nearly 35,500 cars in March, per media reports citing China Passenger Car Association data.
“Valuations for companies in the electric vehicle industry are extremely volatile,” commented Chris Robinson, a research director at Lux Research.
“With significant investor enthusiasm for climate tech stocks, many view public markets as the preferred route for fundraising today,” said Robinson.
He added that valuations of similar companies would suggest the rumored valuation for VinFast “is far higher than expected.”
Tesla’s challengers that went public in 2020 or plan listing in 2021:
|Faraday Future ||US||SPAC||Nasdaq||$3.4B||14,000 pre-orders
|Lordstown Motors||US||SPAC||Nasdaq||$1.7B||100,000 pre-orders
|Lightning eMotors||US||SPAC||NYSE||$823M||3,000 by 2022
A strong brand presence back home, the growing global appetite for EV stocks coupled with the US-China trade tensions could prove to be plus points for Vinfast, auto sector trackers concur.
VinFast stands to benefit from the overall protectionist stance towards the imports of Chinese vehicles into the US, Le added.
However, to justify such an ambitious valuation, Vinfast would need to command a certain market share in both the US and China, Le pointed out.
“How many vehicles would you have to sell in order to get a $50 billion valuation?” Le marked, pointing to Nio, which operates in the world’s largest vehicle market and just recently reached the milestone of 100,000.
“The only way they get anywhere close to that valuation is if they’re selling millions of cars in those markets. And the only way they can sell millions of cars in those markets is if they’re built in those markets,” he added.
Alternatively, VinFast could tap the South and Southeast Asian markets. But, the market is shrinking because of the strong ride-hailing industry, Le said, adding, “the double-digit growth of the vehicle market is gone.”
VinFast has not disclosed the price range for its planned EV exports but its domestic segment C version is priced at $29,800. The models for exports will be in the D and E segments.
The company leverages its parent group’s technology research in big data, AI, consumer electronics and smart city, among others. It has also partnered with US-based NVIDIA DRIVE for its autonomous driving technology and Taiwan’s ProLogium to produce batteries.
VinFast has already generated revenue for its brand with vehicles (fuel cars and electric scooters) on the road. But, in order to win customers from other carmakers, Vinfast will have to work on lower costs and improved access to charging networks, according to Robinson.
“Leading companies in the space will be the ones that are able to provide the lowest costs to consumers while still making a profit, and that requires innovative EV technologies including not only the battery but also vehicle designs that reduce manufacturing costs,” he said.
In addition to global competition, EV-makers will also face a higher level of scrutiny in an IPO in a foreign market particularly with respect to challenges in developing the infrastructure for EVs.
“The costs associated with building and permitting infrastructure can roughly equal the price of a car per charging point, and those go up even further for fast-charging stations,” Robinson pointed out.