It’s a familiar story: A business mogul parlaying much of his fortune into a massive bet on electric vehicles, only to fall on hard times.
Pham Nhat Vuong is among the latest to take after Elon Musk, the PayPal mafia member who made it through what he famously described as Tesla Inc.’s “production hell.” Other examples include James Dyson, the household-appliance billionaire; Jia Yueting, founder of the Netflix of China; and Hui Ka Yan, the embattled property tycoon behind China Evergrande Group.
The odds that any of these players ride out the inferno as Tesla did are looking increasingly long. Dyson pulled the plug on his EV venture in 2019. Jia’s Faraday Future Intelligent Electric Inc. is staring down a potential Nasdaq delisting. And Hui’s China Evergrande New Energy Vehicle Group Ltd. is struggling to survive.
Vuong’s difficulties are proving costly. VinFast, his automaker that filed for a initial public offering a year ago, has delayed plans to list in the U.S. Vingroup JSC — Vuong’s conglomerate spanning homes, hotels, hospitals and shopping malls — and its affiliates and lenders have deployed a staggering $8.2 billion to fund the car company’s operating expenses and capital expenditures the last six years.
The return on all that investment has been meager: VinFast sold just 93,000 vehicles and 162,000 e-scooters.
Vuong has only doubled down, lining up another $2.5 billion for VinFast, $1 billion of which will come from him personally. This month, the company plans to start delivering longer-range versions of its VF 8 crossovers to U.S. customers.
What’s still unclear is how quickly those crossovers will catch on in what is an increasingly cutthroat EV market, with Tesla slashing prices and putting pressure on incumbents that have been around more than a century.
VinFast will need to spend heavily to familiarize Americans with its brand and set up networks for distribution and retailing vehicles, not to mention overcome the growing pains Musk endured when trying to mass manufacture cars.
“Can VinFast run a marathon and sacrifice the short term for the long term?” asks Alexander Vuving, a professor who specializes in power politics and Vietnam at the Honolulu-based Asia-Pacific Center for Security Studies. He said it’s likely the company will need deep pockets to sustain losses for many years.
Representatives for Vingroup declined to comment on Vuong’s plans beyond the company’s statement last month saying he would redouble his funding commitments to VinFast.
Noodle beginnings
Vuong, 54, is Vietnam’s richest man, with a $3.9 billion net worth, according to the Bloomberg Billionaires Index.
He started his own business while studying in Moscow and has said he left Russia with $40,000 in debt. He started a dried-foods company in Ukraine in the early ’90s that sold instant noodles and mashed potatoes and sold it to Nestle for an undisclosed sum in 2010.
Soon after starting VinFast, Vuong spoke openly about his ambition to sell cars in the U.S. and his willingness to spend as much as $2 billion of his fortune toward achieving that goal.
VinFast made many headlines last year, starting with its announcement in January that it would cease making gas-powered cars. In March, President Joe Biden praised its plans to build a $4 billion EV factory in North Carolina. The following month, it filed confidentially for an IPO.
But there was trouble brewing at the top of the company around this time. Michael Lohscheller, a veteran auto executive hired away from leading German carmaker Opel, lasted only a matter of months as VinFast’s global CEO. The company said in December 2021 that Lohscheller left for personal reasons. Truckmaker Nikola Corp. hired him months later.
Weeks after its confidential filing, Vuong said during a Vingroup shareholder meeting that VinFast might delay the IPO until 2023, citing supply-chain issues and market uncertainties. The parent company nonetheless hosted reporters from Bloomberg and other outlets for tours of its car factory in Haiphong, north of Hanoi, treating media, influencers, customers and business partners to a champagne and lobster lunch.
Mixed reviews
The reviews were mixed. A writer for the blog Jalopnik called VinFast’s crossover “simply not ready for America.”
Car and Driver referred to some “quirks” — the accelerator was jumpy in one vehicle and laggy in another — while acknowledging these may have just been “prototype pains.” The Autopian headlined its post: “I drove a VinFast VF8 and it wasn’t as bad as I expected.”
VinFast plowed ahead, staging a ceremony in November at a port in Haiphong for the first 999 EVs it shipped to California.
Some arrived at the Port of Benicia in San Francisco Bay without battery power, according to people familiar with the matter who asked not to be identified.
The company said there were no issues with the vehicles, and that it’s normal for batteries to deplete while in transit for multiple reasons, such as doors not being fully shut.
VinFast’s plans for first deliveries to customers slipped from late December to January, then to February. Late that month, the company announced it would slash initial lease customers’ monthly payments in half, charging $399 a month. It finally handed over its first 45 crossovers to customers in California on March 1 and now has 310 vehicles on U.S. roads, with another 100 due for delivery soon.
Time and money
While Biden gave VinFast a small boost with his shout-out of the company’s US factory plans, his landmark climate bill was somewhat of a setback. The Inflation Reduction Act will benefit manufacturers that already have EV and battery plants up and running; VinFast has warned that its North Carolina facility won’t start production until 2025.
“The Inflation Reduction Act really puts a lot of pressure on them, because it undermines their cost and price advantage that they probably wanted to have until they can have manufacturing here, which is incredibly expensive,” said Mike Ramsey, an auto analyst for Gartner, the executive consultancy. “They did get kneecapped by the IRA, but they also got kneecapped by the reality of trying to pull off an expansion in a far-flung market.”
Setting up networks for distribution, replacement parts and service will be no easy tasks, and without them, consumers won’t have peace of mind that their vehicles can be repaired, said Steve Man, a Hong Kong-based automotive analyst for Bloomberg Intelligence.
“I believe their lofty goals are achievable,” Man said. “But it will take time and a lot of capital.”
