Positive Developments Surface for VinFast Stockholders
For investors, VinFast Motors (VFS 2.68%) has been a captivating prospect from the start. The company transitioned to producing electric vehicles (EVs) exclusively, is backed by a wealthy founder, boasts state-of-the-art manufacturing facilities, and has a solid grasp on the Vietnamese market, with plans to expand internationally.
There's positive news on the international front recently. Here are the details.
What's Happening?
Investors have two pieces of good news to celebrate. Firstly, VinFast, the Vietnamese EV manufacturer, has secured a non-binding agreement with a consortium of UAE investors for at least $1 billion in funding. This is welcome news for investors accustomed to investment from VinFast's parent company and founder.
The investment comes at a time when VinFast is officially extending its presence in the Middle East, which is the second piece of good news for investors. VinFast's first dealership opened in Dubai, marking a significant step in its global expansion strategy. According to management, additional dealerships will open in Saudi Arabia, Qatar, Kuwait, and Bahrain.
This expansion is part of a broader plan, including the lucrative US market. In April, VinFast announced deals with 12 new car dealers in the US, increasing its dealership count to 18 across seven states: North Carolina, New York, Texas, Florida, Kansas, Connecticut, and Kentucky.
The goal is to establish a nationwide dealer network with over 125 sales points in the initial phase and "hundreds" by the end of 2024. VinFast aims to be present in up to 50 markets and countries by the end of 2024 and has plans for two assembly facilities in India and Indonesia in 2026, capable of producing up to 50,000 units during the first phase.
What Have You Done for Me Lately?
VinFast's expansion will be challenging and costly, but the company has gained some traction following strong third-quarter delivery numbers. VinFast reported a 66% increase in EVs during the third quarter, totalling 21,912 units. VinFast achieved its highest monthly deliveries in just September.
However, it's important to note that a substantial portion of the company's deliveries in the past were to Green SM (GSM), a Vietnamese EV taxi service also owned by the chairman and founder of VinFast's parent company, VinGroup, Pham Nhat Vuong. This suggests that VinFast's delivery numbers might appear more inflated than they actually are.
For investors, patience will be necessary as the company embarks on its expensive expansion. During the second quarter, losses widened due to overseas expansion and impairment charges. VinFast recorded a net loss of $773.5 million during the second quarter, a significant 27% increase from the first quarter and 40% higher than the same period the previous year.
It's also a strong reminder to investors that VinFast is a highly speculative company and can trade significantly higher or lower based on minimal or no news. If investors are patient enough to see through VinFast's long-term expansion strategy, the company is speculative enough to remain a minimal portion of your overall investment portfolio.
With the recent funding of $1 billion from UAE investors, investing in VinFast Motors could potentially yield significant returns. This financial boost further strengthens the company's position as it expands its presence in the Middle East and other international markets.
Given VinFast's ambitious expansion plans and the increasing demand for electric vehicles, now might be an opportune moment for those interested in investing in the finance sector to consider this captivating prospect.
