VinFast Auto Ltd. (NASDAQ: $VFS) made a splash when it went public in the U.S. in 2023. At the time, it soared 225% on its NASDAQ debut. It did so well that its market cap was higher than that of General Motors and Ford.
VFS Stock Debut
VFS stock debuted on the NASDAQ on August 15, 2023, following its completion of a merger with U.S.-listed SPAC, Black Spade Acquisition. A SPAC is a shell company that raises capital via an IPO to acquire an existing company.
The stock closed trading at $37.06 on its debut, rising 270% higher than the Black Spade Acquisition IPO listing price of $10 and 68% higher than its open price of $22 that day. The fast rise brought its market cap to $85 billion, against an initial valuation of $23 billion during the SPAC merger.
At the time, Ford had a market cap of $48 billion, while General Motors had a $46 billion market cap. However, it still trailed behind fellow EV makers Tesla and China’s BYD, valued at $739 billion and $93 billion, respectively.
VFS Stock Decline
Since its initial highs in August 2023, VFS stock has continued to tumble. The stock was worth $6.59 at the close of trading on Friday, January 12, 2024, with a market cap of $15.406 billion. Thus far, the stock has lost nearly 90% of its value. A significant reason for the decline is the abysmal performance of the VF8, its first globally available car.
VinFast Makes Final Hail Mary Play with New Car
VinFast is looking to turn its fortunes around with a new $20K car, debuting at the CES in Las Vegas. The car has a driving range of around 125 miles and is just 125 inches long. Titled the VF3, it would be amongst the smallest cars on US roads.
According to Le Thi Thu Thuy, chair of the VinFast Board, they intend to bring the car to North America. Mrs. Thuy noted that in their initial entry into the U.S., all market researchers said U.S. drivers preferred big vehicles. However, Thuy says that she went to the U.S. to speak to dealers in September 2023 and showed them the VFS; they urged her to enter the lower end of the market. Dealers said it would generate volumes, so VinFast decided to develop the VF3 for the US market.
A Change In Strategy
The shift in strategy by VinFast shows the challenges in penetrating the EV market, which is increasingly crowded. According to its earnings report, VinFast delivered around 21,200 units in Q3 2023 in the US. That pales compared to Tesla, which delivered over 435,000 cars in the same quarter. VinFast’s price of $47,000-$53,000 has proven a significant hurdle as Americans become more cautious of EVs.
According to estimates by Kelley Blue Book, EV sales in 2023 were at 1.2 million. However, the rise of EV sales is slowing compared to the previous year. Many drivers cited the lack of infrastructure, the limited range, and cost as the main reasons they had delayed the switch to EVs.
According to Mrs. Thuy, the changing tastes of consumers, means they have to adopt a mass market strategy. VinFast is putting up a $4 billion EV factory in North Carolina as part of this strategy. The company plans to produce up to 150,000 cars annually at the plant once it is complete in 2025. Additionally, the company will work with dealers more closely, abandoning a previous plan for direct sales.
Additionally, VinFast is putting up a $2 billion factory in India, aiming to deliver up to 750,000 vehicles annually in 2026. According to Thuy, VF3, already on sale in Vietnam, will debut in the U.S. early next year. At the CES Las Vegas, VinFast also unveiled an all-electric pickup truck. While it is still in the concept phase, Thuy said they hope to receive feedback for a potential launch in 2026. The truck is part of the broader strategy to target every aspect of the U.S. market.
Leadership Change
VinFast just announced a leadership change in the second week of 2024. Founder of parent company Vingroup, Pham Nhat Vuong, stepped in as the CEO, replacing Mrs. Thuy. Meanwhile, Thuy is now the chair of the board of directors. According to Thuy, the move will help to reposition the company for global expansion.
VinFast Stock Performance
VinFast (VFS) stock’s closing price on Friday, January 12, 2024 was $6.59 per shre.The stock is currently at a significant discount to its 52-week high of $93.00. Additionally, it has lost 36.94% of its value in the past 12 months.
Its current price is below its 50-day and 200-day moving averages of $6.89 and $12.89, respectively. The share distribution shows that insiders hold 98.62%, while institutional investors only hold 0.09% of the stock.
VFS Stock Forecast
Stock analysts give VFS stock a strong buy rating. They predict a wide range of trading possibilities: a high of $12 and a low of $7 for the stock. Their average target price is $9.67 per share, a 46.74% upside based on its last closing price.
Should You Buy VFS Stock?
2023 was a challenging year for EV makers. Tesla, a market leader in the U.S. EV market, flexed its pricing power, banking on remaining ahead over profits. However, China’s cheap labor costs mean that Tesla has faced challenges in winning the price war in China.
Vietnam is even cheaper than China’s labor market. According to VinFast, labor costs are three times lower in Vietnam than in China. VinFast already has a production plant in Vietnam, which automates nearly 90% of its operations and can produce up to 300,000 units annually. Additionally, the company recently bought battery-maker, VinES, projected to save 5%-7% in battery costs.
VinFast already has a foot in the door in the U.S. market. With its new strategy to target the mass market and its ability to leverage lower prices, it could be an excellent year for the EV maker. As such, based on its competitive advantage, VFS stock’s buy rating accurately represents future performance.
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