After three years of health crisis, Ha Long Bay had regained peace. Empty of its 3 million annual visitors, only the fishermen aboard their boats came to disturb the calm and winding waters of this authentic postcard of Vietnam. As if to anchor its roots in pure local tradition, it is here that the powerful Vingroup conglomerate has decided to celebrate the creation of its new automotive branch.
Pop atmosphere in Ha Long Bay
But with great reinforcements of smoke bombs, sound system, cheerleaders and pop dancers, the atmosphere contrasts with the tranquility of the islets of Ha Long Bay. Vingroup brought out the heavy artillery to put on a show in front of an audience of journalists and partners from around the world. Because the group founded in 1993 in the Ukraine by Pham Nhat Vuong sees great things for its new automotive subsidiary that literally started from scratch… Very big indeed! A new $5 billion factory near the capital Hanoi, another $2 billion factory in North Carolina, then a third factory in Germany is announced. Vinfast, the automotive brand founded just four years ago, is putting considerable resources on the table to establish itself as a global automaker. “We wanted to take advantage of an opportunity,” explains the general manager of the group that everyone calls Madame Thuy. According to her, the arrival of the electric car has lowered the entry ticket for this particularly capital-intensive industry. The removal of the pull chain makes the car accessible to average gamers.
French in management
But it’s not that simple, especially for a company that doesn’t have engineering resources. To set up the factories, the industrial processes, the management of the supply chains, the group went looking for top executives almost everywhere. Director of manufacturingSean Calvert comes directly from General Motors, as does Head of Design David Lyon. There are quite a few French people in the management of the company, including Franck Euvrard, before Faurecia and in charge of engineering, Emmanuel Bret, who deals with sales and marketing, who worked for BMW, or Xavier Kaufman, head of after-sales. and the customer experience. Not to mention the express passage of Michael Lohscheller, furtive last summer from Opel, to become the new head of Vinfast… But whose term did not last even five months, officially for personal reasons.
The group also made extensive use of engineering subcontractors to set up the processes, notably Austria’s Magna Steyr. Others such as Siemens also intervened. For the Design, the famous Italian studio Pininfarina was counted on. Ultimately, the Hanoi factory bought no fewer than 1,200 robots from ABB, the highly advanced Swedish robot manufacturer.
A blank check?
“They learn very quickly and don’t try to impose their own cultural codes unlike other emerging countries,” explains a recently depraved Western executive, who doesn’t dare mention China. Vinfast’s other strong point is the blank check from its parent company. At the moment, the bill amounts to more than seven billion dollars. The entire conglomerate is mobilized to finance this project. Because Vingroup is present in almost all sectors of the Vietnamese economy: hotels, leisure, real estate, finance, electronics… With 45,000 employees, it is the leading group in the country. The creation of Vinfast is motivated both by economic reasons and to carry out a true national industrial policy.
Even if its market is narrow, Vietnam imports all of its new cars. By creating a national champion, Vingroup wants to help reduce the country’s trade balance. It also makes it possible to create a virtuous sector, creating employment and technological added value by attracting equipment manufacturers, and why not, one day, other manufacturers. And of course, it is also about flattering a certain national chauvinism.
But to be competitive, Vinfast must produce and sell volume, so it has no choice but to go international. And the brand wants to go very fast. The Hanoi plant has a production capacity of 250,000 cars per year, expandable to… 500,000 cars. By way of comparison, Europe’s largest car factory (targeting a market of 15 million new cars, compared to 400,000 in Vietnam) produces about 480,000 cars a year. In the United States, the North Carolina site will produce 150,000 cars. We do not yet know the capabilities planned in Europe. But, Vinfast’s production capabilities are already those of an established midsize manufacturer, whereas last year it sold just 40,000 cars. In Vietnam, the risk of overcapacity is real as the site will only produce 100% electric cars in the second half of the year. In addition, Vinfast will be the first manufacturer to sell electric cars there and will therefore be in charge of evangelizing the Vietnamese with this technology.
“Vingroup’s executives work under pressure”, tries to explain an executive from the European subsidiary, “in other words, challenges arise that force them to go further”.
Thus, in one year, they have installed no less than 40,000 charging stations in the country, compared to the 54,000 installed in France for more than five years… Vinfast’s speed of execution is the great asset of this group.
An IPO in New York
So Vinfast is investing colossal resources commensurate with its ambitions. However, new resources will have to be found to continue financing. In addition, the group has just announced a plan to list its car subsidiary on the New York market. His goal is to raise $2 billion in fresh money. The financial press evokes a valuation of 60 billion dollars.
But Vinfast risks coming under pressure from the markets when it may not make any money for a few years. Even Tesla took a decade to earn its first dollars.
Especially since Vinfast builds Pharaonic factories. Near Hanoi, the Vietnamese group opened the doors of its site to the international press, including La Tribune, which was able to see the disproportionate dimensions of the site located on more than 338 hectares. Where a Carlos Tavares has made the compaction of production surfaces one of the competitive elements of his factories, Vinfast has invested in immense surfaces, not to mention the volumes and their heights under ceilings that can accommodate real buildings, and therefore both extremely energetic. intensive. In addition, the site assembles electric batteries, but also builds electric buses and electric scooters (500,000 per year). And to illustrate the incredible speed of the Vietnamese, this site was built in just 21 months on what was once a swamp.
Risks of excess capacity
Therefore, the risk for Vinfast is to end up with excess production capacity and excessive costs. The brand relies on the competitiveness of its products to break into the market. The planned range will include five models covering all market segments (small and large SUVs, compact saloons or city cars). The specifications aim to build premium vehicles (well-equipped and well-finished) and innovative after-sales service. All with a competitive price list.
In Europe, the VF8 (a compact SUV) is sold for 43,350 euros, to which must be added the battery rental for 120 euros per month. Certainly, the autonomy is interesting (420 km according to WLTP standards for the basic version). But the question of battery rental, invented by the Renault Zoé (in the early 2010s, but since abandoned) to soften the purchase price of the car, could complicate the readability of the product’s price.
But among Western managers we recognize the agility of the Vietnamese who have no dogmas and who have only one desire: to succeed. They are able to readjust their strategic plan and adapt. In Vietnam, Vinfast’s success is not only a question of jobs, but also includes an eminently sovereign dimension and national pride. Some do not hesitate to evoke revenge on the history of a country that has been mired in bloody wars for centuries. A peaceful and electric revenge.