VinFast Die Young Part 2: VFS crashes, Build Your Dreams (BYD) breaks records
A monster when you met, a pussycat in the morning.
Life in the fast lane has its price, and VinFast (VFS), that oh-so-temporary Earl of Electric Vehicles, paid almost US$92 billion for it in one session late last week.
The momentary EV darling tumbled down its chosen mountain – the Nasdaq Global Select Market – by almost half, giving up 44% in Tuesday trade, scuttling four straight days of meteoric gains.
It is a sudden, kinda violent return to earth. And one suspects these moments of share price truth bombing may be far from over.
By the start of Monday’s session in New York, VinFast had built up a market cap of around $170 billion, by Tuesday morning it was circa US$190bn. Not bad for just two weeks or so of trade as a listed company.
It barged past China’s BYD (Build Your Dream) and Germany’s Volkswagen, to sit 3rd behind Tesla and Toyota on the global automaker rich list.
Yet, in checking reality, it’s good to know VinFast is still not profitable after 6 years of EV-ing.
Its intensely volatile US debut has been hit by production problems away from the bourse – including the bloody recall of its first shipment of 999 vehicles around Xmas.
VFS sales are miniscule vs its Chinese competitors. It wants to sell 50,000 cars this year and says it has production capacity of 300k EVs a year. But net losses accelerated over Q1 in Ho Chi Minh to 14.1tn dong against 9.7tn dong y-o-y.
But if some of these EV/automaker valuations strike you as a little crazy right now, then stand by for the crazier.
Despite the sudden capitulation in share price, VFS still boasts a market cap greater than US$100 billion, clinging disdainfully onto its new title as 3rd-most valuable automaker on the planet.
Porsche (P911) is on its tail now, a handful of Deutschmarks behind, while China’s Tesla Tormentor BYD (1211 HK) is probably overtaking it right now.
Last year more than a third – some 35% of all global EV exports – had China as their country of origin.
Beijing’s cut of worldwide EV exports has just accelerated out the door since about 2018, now officials are taking the sector seriously.
Japan was the largest exporter of EVs 5 years previous with a 24.5% share against China’s not quite 5%.
BYD is out front, taking on the affordable EV bracket. Everyone else is far behind.
And with local demand falling away, Beijing is targeting new EV production with stimmy-like subsidies.
China’s consumer price index fell 0.3% in July, the first downturn in almost 30 months. consumer spending deepens.
No one wants to spend when the property sector is on fire.
So, in the face of shrinking domestic demand, the Chinese government has been boosting new energy vehicle production with massive subsidies and China’s EV brands – wary of that slowdown in domestic demand, are targeting further afield – MEAA and APAC , now they’ve achieved a bridgehead into the EU.
Dongfeng (East Wind) Motors is already flogging its Voyah sports utility into the Netherlands, Denmark and Finland, with Switzerland and Iceland next.
Dongfeng focused on launching EVs in Europe, starting with exports to Norway in June 2022 and currently has about 10 showrooms in that country. It distinguished itself from Western manufacturers by emphasising Chinese history and culture.
Europe has been an exporter of internal combustion engine-powered vehicles, but turned into a net importer in electric-powered vehicles. According to China’s Passenger Car Market Information Association, new energy vehicle exports to Europe from January to June totalled about 350,000 vehicles, about 25% of total EVs and plug-in hybrid vehicles sold in Europe during that period.
In the future, China will likely have excess production capacity, and if that surplus is used for exports, it will cause prices to fall. If more Chinese cars are exported to Southeast Asia, Japan could see a decline in export competitiveness.
S&P Global expects Japanese manufacturers’ share of the global market to fall from around 30% in 2020 to a little under 26% in 2030. It lags behind in electrification and has not found competitiveness in export markets.
“Japan’s automobile production has been supported by exports amid falling domestic demand, but we need to factor in the risk that domestic production will decline in the future,” S&P’s Masatoshi Nishimoto said.
Last week China’s top-selling car brand posted a crazy Q2, turning all we know about quarterly EV unit capacity and three month sales figures upside down.
BYD nailed its best-ever quarterly sales results. Sales of passenger new energy vehicles almost jumped by 100% (ok 98%, but still…).
It moved 700,244 units during a tidal wave of demand in the second quarter.
During the same period, and for which it was rewarded by rollicking share price gains and further inflated market valuations Elon Musk’s Tesla reported deliveries of 466,140 vehicles.
BYD is China’s white knight amid a growing Round Table of increasingly competitive EV makers.
And China itself provides a strategic advantage – not just wholehearted governmental support, but BYD is at home in the world’s largest auto market in terms of demand, sales and production. China right now is mad for EVs. The adoption rate is accelerating and as the largest EV market in the world already, there is a concerted, unified push to ensure Chinese drivers and families are choosing electric cars.
Terrifying and unthought of weather events are helping Americans get an idea about why there’s a global effort to go green – or at least electric in the vehicular sense, but under China’s leaden-grey, polluted cityscapes, it is apparent to 1.4 bn people on a daily basis that legacy cars are done and going EV is a national emergency.
As for the fate of FVS, well, in 1H23 BYD sold circa 1.22 million EVs, (both pure battery-driven as well as the plug-in hybrid sort),
VinFast managed about 11,300 battery-electric vehicles in the first half of 2023.
But this is the rollercoaster VinFast’s Vietnamese owner has chosen.
VinFast’s controlling shareholder Pham Nhat Vuong is still laughing. Vuong’s stake at IPO on August 15, when VinFast went full SPAC, was circa US$18 billion
The shape of his holdings is a tricky denouement. Vuong has circa 1.2bn of VinFast’s 2.3bn outstanding shares held within his wholly-owned Vingroup. Vuong himself owns 51% of that stock (VIN on the HCM City bourse) either directly or through Vietnam Investment Group, or VIG, in which Vuong is listed as the only shareholder.
Then there’s the circa 1.1 billion shares of VinFast held directly by VIG and Asian Star, which is another entity controlled entirely by Vuong or under his wife’s name. The upshot is Vuong has about 99% of VFS.
So his August was a thrill ride.
From Monday to Tuesday, He lost about US$70bn. That might be a bit disappointing when compared to Monday’s close, when his VFS stake was worth circa $140 billion.
A that time Mr Vuong’s name was side by side with the Amazon dude, Jeff Bezos, on the Bloomers’ list of richest humans on the planet
Now Vuong is still counting his circa US$80bn back account, it’s no biggie he’s still ahead on August 14 by some 300%
The VinFast IPO has put the Vietnamese billionaire on the map, although he himself knows cracking the US will be no Sunday drive.
“It will be a very difficult road … But there’s only one road ahead.”