Vietnamese electric vehicle manufacturer VinFast plans to invest up to $1.2 billion in Indonesia to expand its business in Asia in its second phase of business, while facing increasing competition in the United States.
The company has identified Indonesia as one of the key potential markets among seven new market clusters. They see great potential in Indonesia for setting up electric car and battery manufacturing facilities, not only because of the relatively low cost but also because the country has abundant reserves of nickel, a key ingredient in the production of electric vehicle batteries.
VinFast plans to begin its business journey in Indonesia in 2024 with the launch of the right-hand drive VF e34 and VF 5. These two models will be followed by the VF 6 and VF 7.
VinFast plans to invest approximately $150-200 million to build a production facility in Indonesia, which is expected to be operational in 2026. The plant is expected to have a production capacity of between 30,000 and 50,000 cars per year. The plan was announced in the company's filing with the U.S. Securities and Exchange Commission.
The Indonesian plant will be VinFast's third, in addition to its existing facility in the northern port city of Haiphong, Vietnam, and a new plant under construction in North Carolina, United States, which began construction in July.
In addition to Indonesia, VinFast is eyeing other markets in Asia such as India and Malaysia. It also sees opportunities in other global markets, including the Middle East, Europe, Africa and Latin America, covering some 40 to 50 potential markets worldwide. This is an ambitious step in VinFast's business expansion. Starting in 2024, they will work with importers and distributors in these regions. In the long term, VinFast is even considering setting up distribution companies in these markets.
Although VinFast's main market is Vietnam, they have also successfully reached North America and three European countries, namely France, Germany, and the Netherlands.
VinFast itself caught the world's attention when its shares were listed on the Nasdaq exchange through the Special Purpose Acquisition Company (SPAC). Despite a 3.56% drop in the stock price to $16.56 per share as of 10:55 a.m. EDT on Wednesday, the total enterprise value remains high at $38.34 billion. This is despite the stock skyrocketing to $87.83 per share on August 28, fueled by investor enthusiasm and limited shares outstanding.
As of June 30, VinFast had sold a total of 18,700 electric vehicles, the majority of which were sold in Vietnam. Of these, 7,100 vehicles were sold to GSM Green and Smart Mobility Joint Stock Co, a Vietnamese taxi company.
According to the Indonesian Automotive Industry Association (GAIKINDO), sales of electric cars in Southeast Asia's most populous country have increased significantly over the past three years.
In 2010, sales of electric cars in Indonesia reached just 125 units. This number increased to 687 units in 2021, and a big jump occurred in 2022 with more than 10,300 electric vehicles sold. In the first half of 2023, Indonesia recorded sales of 5,850 electric cars.
The Indonesian government also gave a major boost to the development of electric vehicles in everyday use by announcing a 10 percent subsidy for electric vehicle buyers during this period.
Although several brands have already entered the Indonesian market, only two brands, Wuling Motors and Hyundai, dominate the largest market share, providing significant competitive opportunities for VinFast.