Vinfast vertically integrates battery production
Battery firm ‘donated’ by chairman, but capital-intensive expansion plans may stress liquidity
Vietnamese EV maker Vinfast has announced it will merge with battery manufacturer and sister company Vin ES Energy Solutions in order to vertically integrate battery production into its auto manufacturing.
Both companies are subsidiaries of Vietnamese conglomerate Vingroup and the company says that the merger will “enhance Vinfast’s self-sufficiency in battery technology”.
“Under the terms of the merger, Vinfast will acquire all Vin ES’ intellectual property related to battery cells, battery packs, manufacturing facilities, technology, partnerships, and supplier contracts,” the company says.
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“This comprehensive acquisition of VinES’ battery technology and modern manufacturing facilities is an important step in completing Vinfast’s fully integrated production chain and creates an unparalleled competitive advantage for Vinfast in the global electric vehicle market,”
The specifics of merger involve the billionaire chairman of Vingroup, Pham Nhat Vuong, donating 99.8pc of Vin ES joint stock to Vinfast. Vinfast will therefore pay nothing for the acquisition but instead only assume the outstanding debt of Vin ES, which amounts to $462mn. Vinfast’s funding model is highly unusual, relying largely on loans and grants from Pham’s personal wealth.
“The acquisition is expected to bring many strategic benefits to Vinfast in the long term, including securing supply of battery, and battery cost optimisation that could lead to 5-7pc savings on battery costs for the combined business,” says analyst and journalist Clark Schultz.
Vinfast went public and made an explosive debut on the Nasdaq exchange in August, quickly jumping to a market cap greater than legacy firms Ford and GM within its first day of trading. Stock peaked at $82/share two weeks later but have since sunk nearly 80pc from this point.
The company delivered marginally over 10,000 EVs in the third quarter, an increase of 5.2pc, spurred by an uptick in North American sales, the company says. It is not yet profitable, though, albeit its margins improved significantly in the most recent quarter, jumping from -108pc to -30pc.
In late July Vinfast broke ground on an EV production facility in North Carolina. The company expects a production rate of 150,000 EVs/yr, focusing on the VF7, VF8, and VF9 SUVs.
However, the company’s capex is spread thin, as it has capital intensive plans for ramp-ups in a variety of different markets. “Vinfast has optimised its capital expenditure plan for global manufacturing in 2024 and 2025, which is expected to save approximately $400mn, compared to earlier guidance. These savings are expected to be used towards building CKD factories in Indonesia […] and India,” the company said in its most recent quarterly business update earlier this month.
Vinfast also aims for its vehicles to be present in up to 50 global markets and countries by the end of 2024, the update says. These targets may put stress on its capital allocation, and the company may turn to capital markets if it exhausts the deep pockets of its chairman. “Vinfast CFO David Mansfield admitted that it would try to sell more shares ‘for sure’ over the next 18 months,” says stock market commentator Wolf Richter.