We've seen Vietnam,
year by year become one of the fastest growing
economies in Southeast Asia. Vietnamese consumers
are very aspirational. You've got millions of
people riding motorbikes and they wanna be riding inside cars. Vingroup, Vietnam's biggest conglomerate has really tapped into that. The founder and chairman aspires to be the Elon Musk of Vietnam. Vuong is Vietnam's richest man with outsized ambitions. He wants to sell cars not
only to the Vietnamese, but also Americans and other
consumers around the world. And so with his company VinFast, Vuong is planning to build
an electric car factory in North Carolina with
an initial investment of $2 billion. US President Joe Biden
has praised Vuong's plan, but finding success in one of the world's most competitive car
markets won't be easy. I think it's a huge
uphill battle for VinFast to build brand recognition in the US. For a consumer to try something new, to buy a VinFast vehicle that hasn't really been tried and tested, it's a huge hurdle for
consumers to jump over. Pham Nhat Vuong wants to
promote his own business, but he also wants to contribute to Vietnam's image as a rising power. In Southeast Asia, no car
company has been able to do that. If VinFast is successful
that goes very well with the ambition of the
Communist Party of Vietnam. But if they fail, it will
be a very, very hard blow to Vingroup and also to
the national economy. The fall of what was Saigon marked the end of America's
disastrous intervention in support of South Vietnam. After the Vietnam war ended in 1975, the north took over the whole country and they imposed the same socioeconomic model across Vietnam. That means Vietnam adopted
a centrally planned economy with the state sector
playing a very dominant role. There were almost no foreign-invested or private sectors back then. But that kind of policy led
to poor economic development with a high rate of poverty, and there was a lack of even
essential consumer products. In the late 1970s and 80s, Vietnam's economic
troubles were exacerbated by a trade embargo imposed by the US and international isolation following Vietnam's military
intervention in Cambodia. Fearing the collapse of the regime, the Communist Party of Vietnam adopted the Đổi Mới or economic
reform policy in 1986. That means they allow
foreign investment and also the private sector to play a
bigger role in the economy. The private sector in Vietnam
has been growing very strong over the past 30 years. Now they account for
about 40% of Vietnam's GDP and contribute about 30%
of Vietnam's tax revenues. And more importantly,
it accounts for about 60% of jobs in Vietnam. So they play a very important role in keeping the economy growing. But the key issue is that
most of the private companies in Vietnam are small and
medium-sized enterprises. Vietnam really needs strong
leading private companies, to lead the national economic development and Vingroup is one of
such national champions. Vingroup is the country's biggest private company with a market
capitalization of $11 billion. In 2021, its total assets accounted for about 5% of Vietnam's GDP. What makes Vingroup so successful today is that its businesses and brand reach into every aspect of Vietnamese life. You can have a Vietnamese born into a Vingroup-owned hospital. They can eventually go
to a Vingroup school and eventually a university that's operated by VinUnivestiy as well. They can live in a Vinhomes
and shop in Vinmalls as well. The Vingroup umbrella covers over a dozen businesses and the Vietnamese government
points to the company's growth and success as a sign
of Vietnam's modernization. Vingroup is one of the
key players whose strategy is aligned with the
strategy of the government. They have been mostly a
real estate developer. That means they have been
relying on natural resources, land, to grow the company. There have been concerns
about the possible environmental risks of one
planned Vingroup project. In 2019, the government approved
a $9 billion residential and tourism project on
reclaimed land in the coastal Can Gio district of Ho Chi
Minh City, despite concerns that it might damage the
mangrove forest nearby. In July 2020, a group
of environmentalists, academics and researchers
signed a petition calling for an independent
assessment of the project. So we have a large part of forested area, and then you have, you have a small city and along the city you have a beach and then they want to reclaim this land. The project is not removing the mangroves, however it can have some side effects especially on the hydrology and sedimentary dynamics of the mangroves. Depending how the project will be done it can change how the water can flow in. If this project is
preventing sediment to reach the mangrove, then the
mangrove will retreat. The mangrove forest is really the buffer between the sea and Ho Chi Minh. If the mangrove forest
disappears, then the impact of sea level rise, storm surge, will be much more important
for Ho Chi Minh City. While some believe that the political connections of Vingroup's
founder Pham Nhat Vuong are crucial to the company's success, this is something Vuong
himself has denied. And in fact, he says he
really wants to stay away from politics, but you know,
a lot of people in Vietnam don't really believe that
because it's really hard to be as successful as they've become without really political support. Vuong sees himself as
a patriot entrepreneur. He wants his Vingroup
to be really successful, to really make a mark on the world stage. Pham Nhat Vuong studied mining and geology at a university in
Hanoi before he was sent on a scholarship to study in Moscow. After graduating in 1992, he
moved to Kharkiv in Ukraine and set up a company
making instant noodles and other dried food. That company was a huge success and it distributed way
beyond the Ukrainian borders to other nations there in Eastern Europe. And eventually he sold
that company to Nestle. Now he wouldn't disclose to
us how much he sold it for, but we think it was over $150 million. The fortunes of Vietnam
were also improving. Following the government's
economic reforms and the US lifting its
trade embargo in 1994, the country's private
sector started to flourish. And so after accumulating
his initial wealth, Vuong went back to
Vietnam in the early 2000s and started investing in real estate. He saw immense opportunities
in the country back then. He started to build a lot
of real estate projects across the country and helped
to transform the skylines of these cities, especially
in Hanoi and Ho Chi Minh City. He went down to Nha Trang,
which is a coastal beach city and there was an island
there just off the coast and he decided to build a
fancy five-star resort there, something that most
Vietnamese had never seen. In 2012, Vuong's real estate and tourism companies
merged to become Vingroup, making him Vietnam's first billionaire. Real estate remains the
cash cow of the group. Most of Vingroup's other
businesses are making losses. They have to rely on real estate to fund the operation of the whole
group and also the expansion of Vingroup into other sectors. So what do you think of the cars? It's incredible. To create something in such a short space of time, it's really, really
incredible. It really is. VinFast is a miracle for Vietnam. In 2017, Vingroup launched
its automotive unit VinFast, a step towards
Vuong's goal to turn the group into a technology company by 2028. They basically built the
state-of-the-art plant from scratch, out of a swamp and they did it with breakneck speed. You've got really cool robotic
arms all around the factory. You see very few employees
on the ground there, it's all done by these machines, even down to the painting of it. VinFast's approach was a really good one. They hired an Italian company
to work on car designs. They licensed BMW engines. They basically rolled off their first car off the assembly line within 24 months. The prime minister was there. He declared it fantastic, a
great day for Vietnam's growth. The Vietnamese government, they want to turn Vietnam into a upper, middle-income economy by 2030 and a high-income economy by 2045. One of the problems for them
is that they have not been able to develop some key
manufacturing sectors to provide the momentum for the economy. In the past, the state
wanted to rely on state-owned companies and they didn't
live up to the expectations. So they would like to
have major companies, especially private ones
to take over this role. They believe that the automobile industry is a high-tech industry
and it can generate spillover effects across the economy. While Vietnam's car
market is still dominated by foreign players like Toyota, Vinfast has helped to grow
the local automobile industry. As the only domestic car brand, it sold 82,000 gas-powered
cars in three years, a decent share for an
upstart car manufacturer in a relatively small market. In 2022, the company
announced its next big plan: to stop making gas-powered
cars by the end of August and focus on electric vehicles. You won't find their electric vehicles on the road here yet, but
VinFast is about to become a major player in North Carolina. The startup based in Vietnam
is only a few years old, but wants to go worldwide. The transition into
EVs is the future trend and in the EV sector there have not been a lot of established players yet. So if they can do fast and do well, they can become one of the market leaders. Going global, especially to
the US is a logical step. The Vietnamese market is still too small and the infrastructure is not
ready for their EV business. The US is the second
largest market for cars, and they have advanced
infrastructure systems. And they also want to make use of some financial incentives
from the US government. I think the key question now is whether they will be successful
with that effort or not. VinFast has said it plans to break ground on the factory in North Carolina in September and it's on track to begin EV production in the US in 2024. The company has received 73,000 orders for their electric cars,
but it has ambitions of delivering as many as
1 million cars globally within five to six years. Starting a factory in the
US and anywhere around the world, it's a huge undertaking. Obviously you have to build the building and you have to buy the equipment. But I think where the challenge lies is really in the last mile. There are around 30,000
parts in a vehicle. So it's not a very easy
feat for them to overcome, They've been building cars in Vietnam. But coming here, the US,
the challenge is how well they marry all those parts together to ensure there's quality. The US is one of the most competitive auto markets in the world. Chinese EV makers such as Geely and Nio haven't cracked it after years of trying, but VinFast might have a
geopolitical advantage. We have seen a remarkable
trajectory in the relationship between the United States and Vietnam. Unlike China, American politicians are more likely to support
an automaker from Vietnam, a country that's had
closer ties to the US, despite their history. But VinFast still faces
competition from Tesla as well as the likes
of GM, Ford and Honda, who all plan to roll out new
EVs in the next five years. We're not competing with any EV companies. We would like to take market share from the internal
combustion engine vehicles. Not everybody can afford to buy $100,000, $150,000 EVs, right? You are talking about Tesla, aren't you? And many others. The future of mobility is here. VinFast EVs, they're looking to launch two to three models. And the pricing range is between $40,000 to $60,000. That's really comparable
to a Model 3 from Tesla, but half the price of the Tesla Model S. So they're really
targeting the mass market, not really the premium market. And that is the right strategy, I think. Because for an automaker to be
successful and be profitable, they need to build scale. The question is, can they
convince American consumers to plunk down $41,000, $51,000 on a car made by a brand from Vietnam that they've most likely never heard of. Agreements are in place to raise at least $4 billion globally to fund the planned North Carolina EV factory and US rollout. And to ensure VinFast's success, Vuong has committed $2
billion of his own money, but he may have to invest much more. A typical automaker spends
upwards of $10 billion just on marketing expenses alone. So the question is will VinFast
have the capital resource to allow them to make that
strong push into a new market and sustain that capital
investment over time. If they can source
continuous flow of capital and allow them to execute the strategy, they can be successful. For Vingroup and especially
their VinFast business, I think they are now facing a cliff. If they can jump over the cliff, they can reach a land of opportunities and they will become an
international player. But the risk is that if
they fall off the cliff it will be a disaster
not only for themselves, but also for the national economy as well. Vietnam and both Vingroup
want to be on the world stage. They want to modernize. These are narratives that they share. So at the end of the day
how much will the government support VinFast's plans,
especially if they need funding, especially if things go south. I think those are really big questions that we don't know yet the answers to.
