Is this car company embarking on a capital frenzy?, Established only 6 years ago, with a market value exceeding 100 years, it has been "speculated" to sky high prices! The son of the gambling king and the richest man in Vietnam teamed up to become the gambling king | Vietnam | the richest man

On August 15th Eastern Time, Vietnamese electric vehicle company VinFast and special purpose acquisition company Black Spade Acquisition, son of gambling tycoon Stanley Ho, completed their merger and successfully landed on NASDAQ.

On its first day of listing, VinFast became popular with a surge of 254.64% in stock price, and the company's total market value reached $86 billion at the close. VinFast, which has only been established for 6 years, has jumped to become the fifth largest car company in the world in terms of market value, only behind Tesla, Toyota, Porsche, and BYD.

Even on the third day of its listing, VinFast's stock price fell 33.58% to $20, with a total market value of $46.4 billion, still surpassing General Motors, which was established 115 years ago, and far surpassing NIO, Xiaopeng, and Ideal, which are also new forces in the automotive industry.

VinFast's headquarters in Vietnam has an annual sales volume of approximately 500000 vehicles, which is only 1/53 of the Chinese market. However, the stock market has turned it into a sky high price. Is this a capital frenzy or a return to value?

Vietnam's richest man's dream of making cars

Public information shows that VinFast was established in 2017 and is a controlling subsidiary of Vingroup, the largest private group in Vietnam. Vingroup's business covers multiple fields such as industry, real estate, and technology, with its core business being real estate. In 2022, the group's revenue was equivalent to 2.2% of Vietnam's GDP.

The founder of Vingroup is Vietnam's richest man, Pan Riwang, who is also jokingly known as the "Xu Family Seal" of Vietnam. He won his first pot of gold in Ukraine by selling instant noodles, and then returned to Vietnam in the early 21st century to work in the real estate industry and make a fortune. According to Forbes magazine data, Pan Riwang's personal property valuation once reached $7.3 billion, and after VinFast's first day of listing, his personal book value increased by another $39 billion.

Just as many domestic real estate tycoons have set their sights on the automotive industry, Pan Riwang also founded VinFast in 2017, claiming to build the first "Vietnamese owned car" within two years. At that time, Vietnam, as an emerging market, all the cars running on the road were foreign brands, among which Japanese and Korean car companies had already taken root here and occupied most of the market.

VinFast carried the hope of Vietnamese national cars from its inception. Like Xu Jiayin's car making philosophy, at the beginning of his entrepreneurship, Pan Riwang also adopted a "buy buy buy" approach. Shortly after its establishment, VinFast invested $1.5 billion to build a factory and research and development building, and released two models. However, due to insufficient product strength, the market response was mediocre; In 2018, VinFast acquired General Motors' car production line in Vietnam and OEM General Motors' two door economy car Opel. In 2020, sales reached 18000 units, but it still cannot compete with Japanese and Korean car companies.

In 2021, VinFast decided to "overtake by changing lanes" and launched its first electric vehicle, VFe34, transitioning towards electrification. It also announced the discontinuation of fuel powered cars in 2022. So far, VinFast has 6 electric vehicles.

But Vietnam's electric vehicle market has a very small capacity, with only 8400 passenger electric vehicles sold in 2022. As of June 30th this year, the cumulative delivery volume of VinFast electric vehicles was only 19000 units, which is lower than NIO's monthly sales in July 2023.

Based on this, VinFast is eager to expand into overseas markets and has set its sights on the US market. In March 2022, VinFast announced that it would invest $4 billion to build a new car factory in North Carolina, with the goal of starting production by 2024. VinFast has exported approximately 2100 electric vehicles from Vietnam to the United States so far. But because electric vehicles are not produced domestically in the United States, VinFast cannot receive a federal tax credit of $7500, and its product competitiveness is weaker compared to brands such as Tesla.

Is the valuation artificially high?

The first ethnic brand in Vietnam, supported by Vietnam's richest man, and planned for a hair salon may have given VinFast some imagination. However, in terms of current company performance, VinFast may not have the confidence to rank among the world's top car companies.

As mentioned earlier, VinFast plans to achieve localized production in the United States and has already exported some cars. However, based on the current export situation, VinFast's product strength has not been recognized by the local market. In May of this year, after the National Highway Traffic Safety Administration issued a safety warning, VinFast could only recall all of its first batch of vehicles shipped to the United States due to software errors in the car display screens, which prevented the display of critical safety information and may increase the risk of collisions.

In the Vietnamese market, VinFast also recalled 2781 VF8 vehicles in February this year due to the possibility that the bolts connecting the front calipers and steering knuckles may become loose during vehicle operation.

In addition to product issues, VinFast also has a common "burning money" problem among new car making forces. According to VinFast's prospectus, its revenue in 2021 was $670 million and net loss was $1.348 billion; In 2022, the revenue was 634 million US dollars and the net loss was 2.112 billion US dollars. In March of this year, a financial document showed that VinFast's total loss since its establishment reached $5.4 billion.

During its six-year establishment, VinFast received $9.3 billion in financing to cover its operating and capital expenditures, with the majority coming from Pan Riwang's Vingroup.

Pan Riwang once stated that if the operation is stable, the company expects to achieve a balance of income and expenditure by the end of 2024, and may achieve profitability after 2025. Pan Riwang predicted at the shareholder meeting that the sales of electric vehicles will reach 45000-50000 units this year, and the company will produce models such as electric pickup trucks and micro cars according to market demand.

Industry insiders have analyzed the reasons for the sharp rise in VinFast's stock price. On the one hand, many new car making forces, such as Rivian and Nikola, may experience a capital boom at the beginning of their US stock market listings, and their market value may eventually return to rationality; On the other hand, VinFast is a low flow company with very few tradable shares available for trading, making its stock price prone to significant fluctuations.