VinFast Auto
stock shot off the starting line after going public this past week, but the electric-vehicle start-up is likely to stall—and soon. Simply put: Shares are just too expensive.
After an epic first day of trading on the Nasdaq, VinFast (ticker: VFS), which came public via a special purpose acquisition company on Aug. 15, closed at $37.06, up 255%. With that move, the Singapore-based company had a market capitalization of roughly $86 billion, more than the market cap of
Ford Motor
(F),
General Motors
(GM), and
Volkswagen
(VOW3.Germany). VinFast was also worth more than all U.S. EV start-ups combined and more than profitable EV start-up
Li Auto
(LI), and, when including debt and cash, more than Chinese EV leader
BYD
(1211.Hong Kong). It was a heady debut.
There’s a lot to like about VinFast. It has a strong backer in Vietnamese conglomerate
Vingroup
(VIC.Vietnam), and unlike many start-ups, it sells actual cars, some 11,300 EVs during the first half of 2023, with the capacity to build about 300,000 a year. It offers multiple EV models and has already entered the U.S. market—it sold 850 of its VF8 SUVs in California during the first half of 2023, and should roll out sales to the rest to the U.S. soon.
The VF8 is a nice EV. The base model can accelerate from zero to 60 miles an hour in about 5.5 seconds. It gets about 264 miles of range per charge, based on EPA standards and testing, and starts at about $46,000.
Tesla’s
(TSLA) Model Y, which has a similar size, range, and acceleration specs, starts at about $48,000.
Still, $86 billion? To put that in perspective, VinFast was valued at roughly $4.4 million for each car sold this year.
Rivian Automotive
(RIVN), which sells more vehicles within a similar manufacturing footprint, trades at about $275,00 a car. Based on its capacity to produce, VinFast was valued at about $300,000 per car, while Rivian fetches just $93,000.
Other metrics tell a similar story. On Tuesday, the stock was valued at about 46 times the company’s projections of sales of about $1.9 billion in 2023, well above Tesla, which trades for about 7.3 times, and Li, which trades for about 2.8 times. An earnings comparison isn’t possible because VinFast isn’t profitable yet—it lost about $600 million in the first quarter and spent more than $1 billion building its business.
No matter how you look at it, VinFast appears expensive relative to its EV peers. Based on where it’s trading now, VinFast would have to produce BYD-like performance, selling a million EVs a year, while producing tens of billions in sales and generating operating profit margins of at least 5% to justify its valuation.
It’s hard to say why the stock shot up. A small fraction of shares is available to trade, roughly 17 to 21 million shares out of 2.3 billion outstanding, and a limited stock supply can lead to funny things. But there are better reasons to believe the stock will fall before it gets to BYD-like performance.
VinFast will need more capital—from Vingroup or from public investors—and that means more shares will get issued, diluting the ownership stake of existing shareholders. There is also no guarantee that VinFast will hit the sales and profit milestones required to justify the valuation, or that shares won’t fall after the initial euphoria fades.
VinFast stock has already begun to come back to earth, down 46% over the past two days and closing Thursday at $20 a share. Not because of anything the company did, but because of what the market did.
Write to Al Root at [email protected]
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