On its inaugural trading day, Vietnamese electric vehicle (EV) manufacturer VinFast has achieved a stock market valuation surpassing both Ford and General Motors (GM). Although VinFast has yet to achieve profitability, its shares closed at over $37 (£29) each during their debut on the New York market. This impressive performance translated into a market valuation of $85 billion, notably higher than Ford’s $48 billion and GM’s $46 billion.
This surge in valuation reflects the ongoing competition between established motor industry giants and emerging manufacturers striving to capture a share of the rapidly expanding EV market. Notably, the listing bolstered VinFast’s founder and chairman, Pham Nhat Vuong’s wealth by around $39 billion, further solidifying his position as Vietnam’s wealthiest individual.
Pham Nhat Vuong’s control of 99% of VinFast’s outstanding shares, primarily through Vietnam’s largest conglomerate, Vingroup JSC, has resulted in limited availability of shares for other investors to trade. This restricted supply has the potential to cause significant price fluctuations. Despite this, Tuesday’s trading of VinFast shares saw approximately $185 million worth changing hands.
The adoption of a unique approach set VinFast apart from the traditional share sale method; the company utilised a special purpose acquisition company (Spac) to go public. Spacs are frequently employed by startups to expedite the often cumbersome and costly process of transitioning a private entity into a publicly traded one. In essence, this involves merging a non-listed company with a listed one.
Several EV manufacturers, such as Lordstown Motors and Faraday Future, have utilised Spacs to go public in recent years. Nevertheless, these firms have experienced substantial declines of over 90% in their stock market values since their mergers.
Bill Russo, CEO of Shanghai-based Automobility, suggested that VinFast’s situation might differ due to the substantial backing it receives from Vingroup, which possesses a proven record of business growth. Russo pointed out that many EV startups falter due to a lack of profitability and eventual depletion of external funding, as their capital burn rate exceeds cash generation.
However, VinFast faces formidable competition in a landscape where prominent players vie for supremacy. Industry leaders like Tesla, led by Elon Musk, and BYD, backed by veteran investor Warren Buffett, have been reducing prices to drive sales. In the first half of the year, VinFast delivered 11,300 EVs, while Tesla dispatched over 889,000 vehicles in the same period.
Although Tesla continues to maintain a dominant position in the EV market, other players like VinFast are positioning themselves for success. Dan Ives of Wedbush Securities emphasised that while Tesla remains the clear leader, numerous winners will emerge in the EV space. VinFast, he noted, has established a solid foundation for EV success.