Vietnam EV maker VinFast to invest up to US$2 billion in India

Vietnamese electric vehicle (EV) maker VinFast announced on Saturday (Jan 6) that it will invest up to US$2 billion to set up its first manufacturing facilities in India.

The company, which is looking to make inroads into the world’s third-largest vehicle market, said that it will build an integrated EV facility in the southern state of Tamil Nadu. The initial investment will be US$500 million for the first five years of the project, the company said in a statement.

The construction of the EV and battery-manufacturing plants will start later this year in the city of Thoothukudi in Tamil Nadu. The project will have an annual capacity of up to 150,000 units and create 3,000 to 3,500 jobs locally, the statement added.

There are also plans for VinFast to establish a nationwide dealership network in India to develop brand awareness and reach out to consumers.

It was a busy day for VinFast on Saturday as the company also announced that chairman Pham Nhat Vuong would become its new chief executive officer and directly oversee the company’s global operations.

Current CEO Le Thi Thu Thuy, who has held the post since late-2021, will serve as chairwoman and continue to engage with VinFast’s external stakeholders and fundraising activities.

VinFast currently has four battery facilities in Vietnam. It also has two EV-manufacturing plants – one in Vietnam’s Hai Phong city, and another that is under construction in North Carolina in the United States.

VinFast, which made its Nasdaq debut in August last year and has yet to turn a profit, said in October that it wanted to make inroads into India.

The EV penetration rate in India is only around 1 per cent. The Indian government has a target to boost this to 30 per cent by 2030 and is working on incentives and schemes to attract more EV makers.

“Foreign companies who want to crack the market in India will have to figure out domestic manufacturing,” said Shashidhar Kagganti Jayakumar, a research associate at India-based research network Digital Futures Lab.

Investors will need to “understand the context of how things work in India”, he added, noting that there needs to be good after-sales services for EVs that suit India’s hot weather.

India is rolling out a scheme to grant subsidies to EV original-equipment manufacturers that have at least 50 per cent of the vehicle components manufactured in India and locally sourced.

The national government is also offering different types of financial incentives to EV consumers, including direct discounts, exemption from road taxes and registration fees, and access to low-interest loans.

As things stand, the growth of EVs in India is largely from two-wheelers, said Jayakumar, as well as the ongoing green transition in the logistics sector.

VinFast’s product portfolio includes both electric cars and scooters, with deliveries of more than 21,000 and 48,000 units, respectively, in the first three quarters of 2023.

Green and Smart Mobility (GSM), an EV taxi operator mostly owned by Vuong, bought roughly two-thirds of VinFast’s total car deliveries from March to September last year. GSM is also offering EV rental and taxi services in Vietnam, Laos and Cambodia, with fleets entirely consisting of VinFast vehicles.

EV-battery value chain

VinFast said that it wants to have a deeper engagement with the EV-battery value chain, which includes battery cells, battery packs and recycling.

Leveraging capabilities in battery manufacturing could deliver a “significant competitive advantage in cost-effectiveness”, a VinFast spokesperson told The Business Times in an e-mail.

According to some estimates, the cost of a battery could vary from 13 to 32 per cent of the total cost of an EV, depending on the composition and the metals used.

VinFast, which acquired its battery-maker sibling VinES last October, has mainly participated in battery-pack production with two factories in Hai Phong and Ha Tinh.

Last August, the Ha Tinh facility produced the first batch of battery packs, which imported cells from foreign partners as it waits for cells from VinFast’s two other facilities.

In December, VinFast announced that it was in talks with the US International Development Finance Corporation for a US$500 million loan to establish a lithium-ion battery facility in Vietnam.

This will be an “independent project” from existing ones in Vietnam, and details will be revealed at “an appropriate time”, the spokesperson told BT.

VinFast last month also entered into a partnership with Japanese conglomerate Marubeni Corporation to recycle used EV batteries and repurpose them into affordable battery energy storage systems.

This article was originally published online on The Business Times.