Vietnam’s richest man, his new electric vehicle – and a radical new way to charge for cars

A man in a day-glow jacket waves us ahead with a green flag, and we stamp on the accelerator, the trees zipping by on closed stretch of bitumen on Hon Tre Island off the coast of Vietnam.

The SUV, a pre-production VinFast VF 8, spins up to more than 120kph before we hit the end of the road.

While the test drive was a little too fast with only a dash of fury, it demonstrates the company’s high aspirations for the vehicle, the ultimate destination of which is the US market by year’s end.

VinFast CEO Le Thi Thu Thuy and VinGroup founder and Chairman Pham Nhat Vuong in at the VinPearl Resort and Spa in Nha Trang, Vietnam. Reuters

It is an audacious goal for a five-year-old car maker, but VinFast has deep pockets.

It is backed by parent company Vingroup, which operates a network of shopping malls, resorts, real estate interests and amusement parks in Vietnam, with revenues of $4.7 billion last year.

The EV endeavour is the brainchild of Vingroup chairman Pham Nhat Vuong, the country’s wealthiest person, who has an estimated fortune of $5.2bn.

VinFast now owns 8.4 per cent of the Vietnamese car market, the company said. But it wants more – and wants to go all electric.

All in on EVs

A VinFast electric SUV VF8 model is displayed at a store which the Vietnamese automaker plans to open in Santa Monica, California, US. Reuters

EVs make up about 5 per cent of the total US vehicle market, according to research analysts at AutoPacific. But the trend is upwards, reaching 17.4 per cent by 2027, the analysts say.

And VinFast is aiming for the sweet spot in the US market. VinFast’s first two EVs will be SUVs, one of the most popular vehicle categories in America.

“Building a competitive car brand in the US market is daunting and will take billions of dollars annually for years, or decades even, to become an established player,” says Paul Waatti, manager of industry analysis at AutoPacific.

But “VinFast is well positioned in that it has the backing of the multibillion-dollar Vingroup conglomerate that is very dedicated to keeping the budding auto maker flush with cash and resources as it grows into a self-sustaining business”.

To start that growth, VinFast is promising aggressive prices. In the US, the VF 8 will start at just $40,700 for the five-seat SUV.

The base model includes a suite of driver assistance technology, including adaptive cruise control and collision warning, all-wheel drive, and a 0-to-95kph time of 5.8 seconds.

Those specifications place it ahead of many small SUVs in this class.

So how is VinFast able to offer such a competitive price? By coupling it with a unique battery subscription plan.

When buyers buy the vehicle they will also be required to purchase a subscription plan for the SUV’s battery. A standard unlimited-kilometre plan will cost $110 a month for the VF 8.

The company promises to replace batteries if they drop below 70 per cent of original capacity, and the enhanced range version of the Eco model of the VF 8 will be 470km.

Whether consumers will accept such an unusual subscription model remains an open question.

Addressing scepticism and questions about customer confusion over various subscription plans — a limited-kilometre plan will be only $31 — VinFast Global chief executive Le Thuy said other options would be available.

“We will offer it with the battery, as well,” she said in Nha Trang in July.

But pricing has not yet been determined for such an option. (Car lithium ion batteries typically cost $7,000 or more to replace.)

Carolina Dreaming

A VinFast vehicle is assembled at the company’s plant in Haiphong, Vietnam. Reuters

VinFast already has assembly lines capable of producing 250,000 vehicles a year at its factories in Hai Phong, Vietnam. But it will bolster its US plans with a new plant near Raleigh, North Carolina.

The company will break ground on the multibillion-dollar factory this year, thanks in part to a $1.25bn incentive package from state and local governments.

To support the 870-hectare site, it includes about $250 million to build connected highways. VinFast expects to produce 200,000 EVs a year out of the plant by 2027 and employ 7,500 people.

“The North Carolina plant shows a commitment from VinFast that it’s serious about making inroads in the US market and that it plans to stick around for the long haul,” Mr Waatti said.

The company has also received a warm welcome from governments and municipalities such as those of North Carolina, which are looking to attract high-tech manufacturing and investments.

“Electric vehicles … are a critical component of our strategy to reduce greenhouse gas emissions and build North Carolina into a hub for the clean energy economy,” said Roy Cooper, the Governor of North Carolina, when the deal was announced.

The North Carolina plant will no doubt also help VinFast to meet conditions spelt out in the recently passed US Inflation Reduction Act, aimed at reducing emissions that cause global warming and encouraging the use of renewable energy and the transition to electric vehicles.

A general view of VinFast’s factory in Haiphong, Vietnam. Reuters

The bill now signed into law will reinstate the consumer tax credit of $7,500 for some vehicles next year.

And the incentives will apply to SUVs costing $80,000 or less, which hits VinFast’s target prices for the VF 8 and its second larger SUV the VF 9.

However, one of the provisions in the bill is that by 2024, eligible EVs use batteries with at least 50 per cent of the parts coming from the US, Canada, or Mexico. By 2028, that rises to 100 per cent.

On a recent tour of the Hai Phong factory, a VinFast representative said the company planned to start sourcing its own battery cells by next quarter.

Whether those plans will change given the passage of the US bill remains to be seen as auto makers sort through the details of the legislation.

But even US auto makers Ford and GM have said it will be difficult for them to meet those targets in the immediate future.

Decades of Competition

Preliminary test drives of the VinFast VF 8 were impressive. The SUV combines solid handling with an even-handed suspension and in-dash technology that matches that of other EV makers.

But there were some pre-production hiccups on our test drives as well, such as the lack of seatbelt shoulder-height adjustments.

Nevertheless, there is no question that VinFast has demonstrated its ability to adopt new technology and rapidly increase manufacturing in a big way in Vietnam.

However, it will take more than impressing automotive journalists to break into markets across the Pacific.

“We’ve seen the Germans, Japanese and most recently the Koreans successfully break into the US market, but it took a lot of time and money to chip away at market share before finally becoming credible brands,” Mr Waatti said.

“Now, VinFast, an unknown brand from a country not known for making vehicles, will have to compete with those very auto makers that have spent decades building brand equity and confidence with the American consumer.”