Commentary: Why Vietnam’s electric carmaker VinFast is launching in the US and bypassing China
In launching its electrical vehicles in the highly-competitive United States market, Vietnamese carmaker VinFast hopes to makes its mark as a global brand, says an observer.
SINGAPORE: VinFast, Vietnam’s new automotive brand by the conglomerate Vingroup, introduced two new electric vehicle (EV) models, the VF e35 and e36, at the Los Angeles auto show in November.
The investment in the American market demonstrates the company’s commitment to succeed by growing a global presence.
Rather than focusing on access to next door China, the world’s largest auto market, Vingroup has turned to the second largest, yet “original”, global auto market – the United States, to establish international brand recognition.
This comes despite the rolling out of the Regional Comprehensive Economic Partnership (RCEP) that will facilitate greater flows of goods and supply chain linkages across the Asia Pacific.
There are likely a number of intersecting strategic reasons for by-passing China.
These include ongoing Vietnam-China political tensions, the historical complications for foreign automotive companies depending on Chinese joint venture partners, and the Chinese government’s sensitivity to green vehicle competition, a key industrial development sector that has received strategic support from Beijing.
Although the Chinese market is seemingly saturated with competing global and local brands, making market entry more challenging, the same could be said of the United States.
START-UPS HAVE A HARD TIME IN THE AUTO SPACE
Many much larger companies ranging from Peugeot to Isuzu have entered and subsequently exited the US auto market.
Start-ups often have an even harder time. When asked about the threat of new auto companies like VinFast, a BMW executive at a corporate conference was dismissive.
According to him they simply do not have the name recognition or history. What accounts then for the focused investment by this Vietnamese conglomerate and automotive production newcomer in securing a successful American market entry?
VinFast GlobalCEO Michael Lohscheller explains the company’s rationale: “If you want to become a global brand, you have to come to the US”
Indeed, high technological and safety standards for cars in the US mean that VinFast hopes a successful product uptake there will build confidence in the brand, which will extend to sales and recognition elsewhere in the world.
VinFast is additionally looking at setting up a manufacturing plant in the US and listing its shares on the New York stock exchange.
By focusing on electrical vehicle sales in America, VinFast sees an opportunity to leap frog into a transition market where industry leaders are no longer necessarily established original equipment manufacturers.
Rather, Vinfast sees competition with new companies like the now widely recognised Tesla Motors as well as many others such as Rivian that are banking that they can attract new customers based on experimental innovation and competitive price points.
New technologies often attract younger buyers willing to try brands that are not yet established.
VinFast is currently focusing its efforts on California, the centre of the technology research and development world. The cars introduced in Los Angeles in November were EVs designed by Pininfarina with attractive yet safely understated styling.
Many of the automotive cultural insights and design studios are located in California, and the state is generally seen as a trend setter for styles that eventually make their way to the rest of the country and world.
The city of Los Angeles offered VinFast a state tax credit to establish its headquarters there. VinFast sales strategies will be focused online, following the pathways of other EV car makers that have had to challenge state auto dealer franchise laws.
One factor that VinFast did not necessarily think about in its LA debut but may contribute in a perhaps small but nonetheless interesting way to early publicity and uptake is whether its products attract the attention of California’s significant Asian American population.
Making up 16 per cent of the state’s population, including the largest concentration of Vietnamese outside of Vietnam, Asian Americans have been found on the whole to be more trend savvy than other ethnic groups, and to prefer Asian car brands.
In addition to technological trends, Asian Americans have been gauged as more likely to demand environmentally friendly products.
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Indeed, green consumers may serve as convenient if unintended entry points for Asian automobile companies that are being pushed by consumers and regulators in the face of unsustainable air pollution in many of Asia’s largest cities to build more electric cars.
Such developments have in turn shaped the global strategies of the dominant players in China’s market, such as General Motors, that are now also planning to roll out all-electric line-ups by 2035 in the United States, despite the fact that demands for green transportation technologies in the US have been tepid.
In the meantime, VinFast has been steadily showing up on the streets of Vietnam. Its best selling car in the country is a small economy hatchback called the Fadil.
It is neither an EV nor a luxury car, quite different from the cutting edge image Vingroup is promoting abroad through its latest American launch. Cultivating a new brand identity is a risky venture.
Done carefully, VinFast may soon enter the lexicon of trendy new marques that are capturing young global buyers’ attention and by-passing traditional automotive giants such as GM, Toyota and Volkswagen.
Making a grand gamble on branding for the future seems a fair strategy for an automotive start-up company without roots in the past to rely on. Not being tied down by such roots may perhaps become one of VinFast’s greatest assets.
Dr Ivan V Small is Associate Professor of Anthropology and International Studies at Central Connecticut State University in the United States, and previously a Visiting Senior Fellow with the Vietnam Studies Programme at ISEAS – Yusof Ishak Institute. This first appeared in ISEAS - Yusof Ishak Institute's blog Fulcrum.sg.