VinFast stock is overvalued

Vietnamese EV maker VinFast has managed to sell Wall Street on a Nasdaq listing that values the loss-making startup with a market cap of more than US$85 billion, almost twice as much as Ford or General Motors and more than BMW and Mercedes- Benz.

VinFast needs to deliver more than twice the sales notched up so far this year in the remaining five months to hit a stretch annual target set by its founder of selling 50,000 EVs. For that, it needs to complete a revamp of a sales strategy to bring in distributors and dealers rather than selling through its own platform alone, an approach it borrowed from Tesla.

It will also require bringing costs down to compete on price with the likes of Tesla, which has been using its scale and industry-leading margins to cut prices and pile pressure on rivals since the start of the year.

VinFast merged with SPAC Black Spade to list on Nasdaq yesterday. Since 99% of the company is controlled by VinFast's founder, Pham Nhat Vuong, the stock's tiny float makes it subject to more volatility.

Other EV SPAC deals, including Lucid, have seen their shares tumble after listing. Lucid is valued now at under US$15 billion, nearly 40% less than its US$24 billion SPAC valuation in 2021.

VinFast's intention to raise additional funding in the next 18 months is also a potential threat to its lofty valuation.

Founder Vuong had said in May that VinFast could sell 50,000 EVs this year. Through the 7 seven months, it has sold over 16,000, including its sales in Vietnam. That includes sales of just 137 of its VF8 model in the United States, the only model it currently sells there.

Consultancy AlixPartners has said it estimates EV makers need annual sales of 400,000 vehicles to break even, including in China.

Pricing is another challenge. The Tesla Model Y is almost US$7,000 cheaper than VinFast's VF8 after including federal subsidies.

CEO Thuy said VinFast believed its products were priced competitively but was working to bring prices down. "There is no other (automaker) in the world that has as low a cost base as in Vietnam," she said. "All of that is leading to cost reduction in the future."