Vietnam's "Xu Jiayin" car building was successful

In Vietnam, there is a "richest man" with a similar resume and dream to Xu Jiayin - to become the richest man by real estate, but he has a dream of building a car in his heart.

He made his fortune on Vingroup, a comprehensive real estate group with a total market value of more than US$24 billion, and was listed as Vietnam's richest man on the Forbes World's Richest List in 2022 with a net worth of US$6.2 billion.

Pan Riwang

However, the richest man's ending in building a car is very different from Xu Jiayin:

At the end of October last year, Hengchi Automobile, which has been manufacturing cars for many years, had just delivered its first mass-produced car, but it was repeatedly questioned, on the one hand, because of the debt involvement of Evergrande Group, on the other hand, under the background of the rapid development and fierce competition of the domestic electric vehicle market, Hengchi did not seem to have much advantage.

In 2022, Pan Riwang's car manufacturing company Vinfast has frequently made headlines and attracted repeated attention. Strategic cooperation with CATL, obtained US$135 million financing from AIIB, high-profile entry into European and American markets, and submitted a prospectus in the US stock market, which is expected to reach a valuation of US$60 billion (about RMB 400 billion).

When the Chinese car game has reached the second half, the Southeast Asian car manufacturer is still refreshing its presence and carrying out its own first half of the sprint.

But at least at this moment, Pan Riwang has fulfilled Xu Jiayin's unfulfilled dream.

The same dream of building a car

Before the car, Phan Riwang's image in Vietnam may be more like the Vietnamese "Li Ka-shing", he is low-key and rarely appears in the media's vision.

But in the business world, he is full of aggression, and his business philosophy is "to start a business is to attack, not defend".

In the 60s, Phan Riwang was born in an ordinary family in Ha Tinh province in central Vietnam, where three siblings relied on their mother selling tea on the side of the road to make a living.

However, poverty did not stop his education, and he was admitted to the Hanoi University of Mining and Geology and then went to Moscow as a public student.

After graduating from university, Pan Riwang used $10,000 scraped together to open a restaurant in Kharkiv, Ukraine, and embarked on the road to entrepreneurship. In the process, he found that in the Ukrainian region where food was scarce, the people had a strong demand for cheap but filling instant noodles, so he raised money to set up a food company to sell instant noodles and other fast food products, and earned his first pot of gold.

Since then, the food company has gradually expanded, producing hundreds of food products, and has also expanded its business into dehydrated mixed ingredients, exporting to dozens of countries around the world.

With the gradual development of innovation in Vietnam, Vietnam's economy has ushered in a golden period of rapid development. In 2001, Phan Riwang returned to Vietnam with his first pot of gold earned in Ukraine.

In Phan Riwang's investment concept, there is a Chinese similar: he believes that the Vietnamese are like Chinese, they are practical and prefer physical investment, so the house as a necessity of life can bring people a strong sense of security.

With this, Pan Riwang started his real estate career.

He first founded Vincom in Hanoi, mainly engaged in the development of shopping malls, high-end office buildings and apartments; He then keenly identified opportunities in the tourism industry and founded Vinpear, which focuses on tourism and entertainment real estate projects such as five-star hotels, luxury resorts, beach villas, water parks and golf courses.

In 2012, he merged the two companies to form what would become Vingroup.

Pan Riwang's Vingroup brand

If the story ends here, it is still about a poor boy turning over through real estate, then what later made him and Xu Jiayin more and more similar was the dream of building a car.

Following Pan Riwang's investment ideas, it is not surprising that he decided to enter the car manufacturing industry: people like physical assets, and the latter two in "food, clothing, housing and transportation" have more potential to become "assets", and in addition to houses, there are only cars left.

In 2017, Phan Il Wang's Vingroup officially announced its entry into the new car industry and established VinFast Automotive, becoming the first independent car company in Vietnam.

Poor Vietnam's auto industry

If Xu Jiayin wants to build a car, it is a fantasy that emerged on the basis of Evergrande Group's zero; Then Pan Riwang's dream of building a car is more magical than Xu Jiayin.

Before Phan Riwang built cars, Vietnam's automotive industry was not blank, but compared with China, there was indeed no "domestic car" and automobile power technology.

Vietnam's entire car accumulation can be seen from the rich list of Hurun Report.

On last March's list of the world's richest people, in addition to Phan Riwang, the protagonist of this article, there was a fifth-ranked car mogul, Tran Ba Duong, who runs a long-established Vietnamese car company, Thaco Auto Corporation, which was the most successful Vietnamese auto company before Vinfast.

Tran Ba Duong, founder of Changhai Automobile, known as "Vietnam's automobile king"

However, Changhai Automobile is not an independent car company, it first relied on the car dealership business, and gradually began to assemble cars such as Kia and Mazda in Vietnam, and its identity is "assembly plant leader".

In Changhai Motor's Vietnam Wikipedia, it disclosed its main OEM brands and models, mainly Mazda and Kia (Hyundai Motor Group) models, as well as BMW, Volvo and some commercial vehicles.

Changhai Automobile also produces several trucks and light commercial vehicles.

Vietnamese wiki page, transliterated Chinese

It can be said that Changhai Automobile's status in Vietnam is similar to that of local manufacturers of various joint venture brands that have flourished in China earlier. They didn't have a hard time getting status and wealth, but they didn't own the technology, and no other brand tried to develop it themselves.

In this context, Vietnam's automotive industry has been stuck in the assembly and "foundry" stage for a long time, and before Vinfast, Vietnam did not have an independent car brand and no technology.

A Hyundai and a Mazda control the lifeblood of Vietnam's automotive industry, while an organization called the Vietnam Automobile Manufacturers Association (VAMA) counts only Japanese and Korean car brands produced in Vietnam.

Even when the entire country has no technical background, Pan Riwang still made an amazing decision in building a car with confidence.

The word VinFast comes from the acronyms of several Vietnamese words, ViệtNam (Vietnamese), Fongcách (style), Antoàn (security), Sángtạo (creativity), Tiênphong (pioneer).

This name perfectly encapsulates the richest man's vision and boundaries for Vietnam's auto industry and his own car manufacturing: to create stylish and creative pioneer cars under the premise of safety.

But the key point that distinguishes him from Xu Jiayin is that he decided to make fuel vehicles first, and then transform to intelligence and electrification.

German technology brought by BMW

In the era of fuel vehicles, the most critical thing is power technology, which is exactly what the Vietnamese automotive industry lacks.

As Vietnam's richest man, Phan Il Vong has no shortage of money, and money can solve many problems: for example, in Haiphong, a small town on the border of Vietnam, he spent a huge US$3.5 billion to build a car production plant based on Industry 4.0 technology standards.

However, the feeling of the establishment of this factory in the hearts of the Vietnamese people is the same as when the Chinese people heard that Xu Jiayin was going to build a car: he must be making trouble, and even took this land just to continue to build a house in the future.

However, Pan Riwang still ran wildly on the road of car building - the specific tactical route is somewhat similar to Xu Jiayin, mainly relying on "buy, buy", "combined", "circle", that is, buying technology, comprehensive cooperation and establishing a circle of supplier friends.

As mentioned earlier, Vietnam did not have any accumulation in terms of technology before Phan Riwang, so Vinfast initially received a lot of ridicule from suppliers.

VinFast's CEO Lai Thi Qiu Shui once admitted at the factory's delivery ceremony, "Within 18 months of the company's establishment, our manufacturing plant has been in operation. In the early days, an email we sent to a parts supplier was thrown in the trash. ”

In the end, VinFast chose to trade money for technology.

And the key step here is the powertrain from BMW.

If in China, the power battery giant CATL grew up with the support of BMW, then Vinfast is the leading car company supported by BMW in Vietnam.

One of Vinfast's "warriors" named Vo Quang Hue was a key figure in facilitating Vinfast's partnership with BMW. He graduated in mechanical engineering in Germany with a master's degree and worked for BMW for many years before joining Vinfast as CEO of Bosch Vietnam.

These backgrounds led Phan Riwang to find him and made him a strong proof in helping Vinfast negotiate with BMW - although BMW does not yet know who Vinfast is, Vu Quang Thuan joined enough to endorse the new Vietnamese car company.

After 5 months of negotiations, BMW agreed to hand over a set of technology, although it was not the most core and advanced technology, but the previous generation X5 technology that has been retired.

Vinfast's key fighter, Take, Guangshun

Eventually, relying on Wu Guangshun's many years of experience in Germany, Vinfast transferred most of the important craftsmanship and technology from Germany, the home of the automotive industry.

In fact, Vinfast's fuel vehicles, except for the logo drawn by Pan Riwang himself, are all "bought and closed". The design was done by Pininfarina Design Studio, which designed several Ferrari sports cars; The powertrain and frame are bought BMW technology (the previous generation X5); Engineering and process research and development rely on foundry giant Magna; The gearbox is from the ZF 8AT (for the BMW Multi-Series).

In this way, Vinfast's first car, the LUX A2, was pieced together in 2018, and then in 2020, VinFast released a flagship SUV, the President, which is still based on the powertrain and chassis technology of the previous generation BMW X5, and innovatively crammed into a V8 engine from General Motors.

Regarding the addition of GM, it is another story, using Ferrari's design team and BMW X5 assembly technology, Vinfast looks like it is going to develop in the direction of luxury cars.

But Pan Riwang, as a cross-border and transnational businessman, is indeed sensitive enough. Previously, in an interview with Nezha, the lithium cat laboratory mentioned that A00-class cars in Southeast Asia are the most popular.

In 2019, Vinfast copied BMW's route and found GM again, wanting a cost-effective car that was suitable for Vietnam but GM itself did not pay much attention to. So GM gave the unpopular crossover Opel Karl Rocks that debuted in 2016 to Vinfast, and Vinfast modified the engine and introduced it to the market at a price of about 100,000 yuan, and this car was welcomed by the local market without exception. The cooperation with GM is not only as simple as building a small car, but also allows Vinfast to win GM's business in Vietnam and car manufacturing qualifications.

Although the technology is mainly bought, the fuel car "cobbled" by Vinfast has even achieved "explosive" sales - this is the biggest difference between Vietnam's richest car and Xu Jiayin, Vietnam's independent market is blank, and the richest man succeeded.

Until January 2022, when Vinfast announced that it would stop selling fuel vehicles, most of Vinfast sold fuel vehicles, totaling 82,000 units. Among them, 17,000 new vehicles were delivered in 2019, more than 30,000 vehicles were delivered in 2020, and more than 35,000 units were delivered in 2021.

This data is not outstanding compared with China's "new forces" selling tens of thousands or even 30,000 a month, but in Vietnam, this is indeed a crushing level of sales.

According to data from the Vietnam Association of Automobile Manufacturers (VAMA), the total sales volume of vehicles in the Vietnamese market in 2021 was about 304149 units, of which Toyota ranked first with sales of about 67,500 units, followed by Kia assembled by Changhai Automobile with sales of about 45,000 units.

SALES OF ASSEMBLED VEHICLES IN VIETNAM, SOURCE: MARKLINES, A GLOBAL AUTOMOTIVE INDUSTRY PLATFORM

Based on this calculation, Vinfast's car sales can be ranked third in the Vietnamese market, with a market share of about 11% in Vietnam.

This is the achievement of its establishment only four years later, and it has surpassed most foreign brands and joint venture brands that have been cultivating the Vietnamese market for many years, and has made many struggling Japanese and South Korean car companies hungry.

Electrification and globalization

At the beginning of car building, Pan Riwang's timeline for VinFast was as follows: 2017-2019, polish the foundation, and be familiar with high-quality and inexpensive fuel vehicles; From 2020 to 2022, we will accelerate the transition to electrification and intelligence, and enter the global market after 2022.

At this step of fuel vehicles, Vinfast can proudly say that it has succeeded.

The step of electrification is slightly later than the target. According to the prospectus, until September 2022, Vinfast's main sales volume will still come from fuel vehicles.

However, from 2021, Pan Riwang began to release Vinfast's electric vehicles, which are VF e34, VF e35, VF e36. Among them, E34 received 3,692 orders within 12 hours of opening reservations in the Vietnamese market, directly setting a new record in the Vietnamese auto market.

At present, Vinfast has also opened the pre-order of its two electric vehicles. The electric vehicles on sale are mainly aimed at the pure electric SUV category, including the five-seat VF8 and seven-seat VF9 models, with WLTP ranges of 471 kilometers and 593 kilometers respectively. In terms of battery life, compared with the new domestic cars, the current Vinfast is not excellent, but it is enough in the barren Vietnamese market of independent car brands.

Source: Prospectus

Since October 2022, the Vietnamese "new force" has started to all in electric vehicles, and has copied its attitude towards technology in the era of fuel vehicles - mainly relying on suppliers, only this time the suppliers have shifted from Europe to China.

At the end of October 2022, VinFast and CATL announced the signing of a memorandum of understanding on global strategic cooperation to cooperate on projects such as skateboard chassis (CIIC); In November, the joint venture factory between Vingroup's battery manufacturing and R&D company and Guoxuan Hi-Tech broke ground, mainly producing lithium iron phosphate batteries, with an annual production capacity of 5GWh, which is expected to be put into large-scale production in the third quarter of 2024; In addition, suppliers from China include KINGWAY, which provides millimeter-wave radar, and Huayang Electronics, which provides HUDs (head-up displays).

Instead of taking the technology of fuel vehicles from the German automobile industry five years ago, it is more logical to take battery-related technology from Chinese suppliers today.

For Chinese familiar with the electric vehicle market, Vinfast chose CATL for obvious reasons: in today's lithium battery world, Chinese companies can be said to be the only one. And the Ningde era chose to hold hands with Vinfast, there is also evidence.

On the one hand, many Chinese "new forces" car companies will target Vietnam, regard it as a key stop in the sea, and have carried out a series of basic work preparations from factories to dealership networks in the local area, and following domestic car companies to Southeast Asia is an inevitable choice for CATL. On the other hand, in Vinfast's goals, followed by large-scale supplier cooperation is its own overseas - will be dominated by Europe and North America, taking the two models currently on sale as an example, VF8 has been delivered in Vietnam, VF9 is expected to be delivered mainly in Europe and North America, so the cooperation with Vinfast will also make China's lithium battery industry chain more way to enter Europe and the United States.

With this set of "take-it-ism" steady and steady line, Vinfast finally entered the global market with less advanced technology as planned.

In the prospectus, Vinfast disclosed plans that the main battleground for its electric SUVs in the future will include North America, Europe and Vietnam.

In the U.S. alone, VinFast is in action. It first obtained permission to sell electric vehicles in the United States, then opened four new dealerships in California, and then opened sales of two pure electric SUVs in the United States, the VF8 (starting at $57,000) and VF9 (starting at $76,000).

Finally, and most importantly, Vinfast announced an investment in the construction of an electric vehicle plant in North Carolina, USA, with a $2 billion investment in the first phase, which is scheduled to be completed and put into operation by July 2024.

Waiting for Vinfast, it seems that the road is already smooth. It aims to produce 1.1 million vehicles a year by 2026.

New battlefields

But the huge electrification and intelligent plans are still consuming the cash flow of the richest man.

According to data disclosed in the prospectus, in the first three quarters of 2020, 2021 and 2022, the Vietnamese "new force" achieved operating income of US$576 million, US$1.603 billion and US$439 million, respectively. Automotive revenue in 2022 declined year-on-year.

Source: Prospectus

At the same time, in Vingroup's annual report, the revenue of the industrial production segment (including Vinfast) also showed a significant decline in 2022.

Source: A Vietnamese media

At the same time, it lost $800 million, $1.348 billion and $1.445 billion in the three reporting periods, respectively, while revenue declined, while the scale of the loss continued to widen.

Source: Prospectus

Prior to the filing of the prospectus, Vinfast's primary source of funding was the richest man-owned Vingroup Group and its affiliates, and since 2017, Vinfast has received a total of $7.5 billion in financing at the group level, including subsidiaries and external lending channels.

The huge plan to build factories overseas and continuously deliver new models in the future makes the real estate group, the "gold father", a little powerless.

Vingroup's data shows that in the consolidated statements, Vingroup Group's revenue declined in 2022, and in 2022, when the epidemic improved, the profit side picked up, but Vinfast is still the main drag.

In 2022, Vingoup Group's total after-tax profit was VND 1,982 billion (approximately USD 83 million), while the net profit of a single segment of retail real estate reached VND 2,735 billion (approximately USD 115 million).

At the same time, the plan to go overseas is also encountered, Vinfast originally planned to go overseas to produce cars in the Vietnamese town of Haiphong and ship them to the United States, because it did not meet the conditions of the US tax credit, Vinfast decided to build a factory in the United States.

However, at present, the delivery of cars under construction in Haiphong has to be delayed in the United States due to certification reasons in the United States, while the construction progress of the North Carolina plant is lower than expected, and the media has also exposed layoffs in the United States.

A recent Bloomberg report mentioned that despite the various financial conditions Vinfast is currently facing, Pan Riwang has made it clear that he does not intend to provide follow-up funds for Vinfast in the form of internal support.

As a result, IPO financing has become a must for Vinfast to face today, and what awaits it is a more difficult battle.

Perhaps this is not yet Vinfast's ultimate victory, because Phan Riwang's ultimate vision is to become the "Vietnamese version of Tesla".

But Vietnam's emergence as an "independent car company" is a confirmed success.

Among them, there is enough space given by the almost blank Vietnamese "blue ocean" market, and the support of Vingroup Group's huge financial resources.

In addition, making the most of the supply chain and having a flexible and progressive strategy are also essentials.

But in the future, after entering the international market, the richest man will no longer face the relatively easy Vietnamese market.

What Vinfast needs to do is not only to face the needs and regulations of the European and American markets, but also to fight head-on with a number of Chinese car companies in the new market, and before becoming Tesla, Vinfast must at least fight with BYD and perhaps countless "Wei Xiaoli"...

And how many Chinese car manufacturers are, this Thai car manufacturer may not have really seen it.

At that time, whether Pan Riwang can maintain the same concentration and endurance as before may be the biggest test Vinfast will have to face in the future.

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Resources:

1. The Vietnamese car market in 2022 is more and more able to fight, and 36Kr goes to sea

2, Pan Riwang, Changhai Automobile Wikipedia

3、History of "Made in Vietnam" cars - from the time of the war to the time of VinFast

4、Why does BMW share car manufacturing technology with Vinfast?

5. Global automotive industry platform https://www.marklines.com/cn/statistics/flash_sales/automotive-sales-in-vietnam-by-month-2021

6、Vingroup recorded a pre-tax profit of VND 12,694 billion in 2022

7、VinFast founder has no plans to inject more money into EV maker

8. Vinfast prospectus

Author: Chen Chen, Source:

Lithium Cat Lab

, original title: "Successful version of "Xu Jiayin", in Vietnam"