Wednesday, May 29, 2024
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When you think of electric automobiles, you think of Tesla (at least if you’re in North America). Tesla is currently the world’s most valuable automaker and is projected to deliver 1.8 million vehicles this year. While Tesla is the undisputed leader of the pack, many smaller electric vehicle manufacturers are trying to find a toehold in the challenging marketplace for EVs. One of these is the Vietnamese company Vinfast.

If you’re anything like me, you hadn’t even heard of Vinfast before this week. That all changed on August 28, when Vinfast stock surged by 21%, making it the world’s third-most valuable automaker behind Tesla and Toyota.

Vinfast is mostly controlled by Vietnam’s richest man, Pham Nhat Vuong. According to a recent filing, he has a stake in the company of about 99.7%, leaving a very limited number of shares available publicly. This has contributed to extreme volatility in Vinfast’s share price.

Just one day after Vinfast became the third-most valuable car company in the world with a market value of $160 billion, its stock price plunged. Vinfast shed $90 billion in market value.

This was a particularly dramatic swing, although wild moves in share price are nothing new for Vinfast. After making a splash with its Wall Street debut in August, Vinfast’s share price has repeatedly surged and plummeted. As of the beginning of this week, Vinfast shares had spiked or slumped by more than 14% in 11 of the preceding 12 trading sessions.

It is not only the limited number of shares that accounts for Vinfast’s unsteady share price. As with Tesla, the high market value of this electric car manufacturer is somewhat based on speculation, in that EVs are expected to become more widely adopted in the near future. Vinfast’s current numbers certainly do not justify anything near a $160 billion valuation: Vinfast expects to sell just 50,000 cars this year to Tesla’s 1.8 million.

Yet, the market seems pretty convinced that, despite relatively modest production numbers even by industry leader Tesla, some company, at some point, is going to become massively profitable selling EVs. This perception has made Tesla stock popular with retail investors, and Vinfast too has generated enthusiasm among retail traders — which can be another contributing factor to share price volatility.

So far, though, even legacy automakers like General Motors and Ford have been unable to dislodge Tesla’s iron grip on the EV market, despite having poured billions into developing their own EV product lines. With Tesla aggressively pressuring its competitors by slashing prices throughout 2023, the carnage has become immense. For instance, Ford lost $2.1 billion on EVs last year but expects that to more than double with a loss of $4.5 billion for 2023. Companies can’t bleed money like that on a given product line for too long without radically changing course.

Despite struggles like Ford’s, many investors are optimistic that Vinfast could find a purchase in the EV marketplace even as the less dynamic legacy automakers are flailing. The company is in the process of building a factory in North Carolina, at a cost of $4 billion — a significant investment which could hasten Vinfast’s meaningful entry into the North American market.

Vinfast is worth keeping an eye on. You are not very likely to see any of its cars on American roads anytime in the near future. But I bet Vinfast’s share price is going to continue to have entertainment value as we await its production ramping up in North America.


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