VinFast’s Strategic Entry Into India’s Electric Vehicle Market, Starts Looking For Land To Establish Manufacturing Facility In India

It’s raining EVs In India; Vietnamese automaker VinFast (with an $18 billion valuation) is said to be actively searching for suitable land, thus making its entry into the electric vehicle (EV) market in India.

The decision closely follows Tesla which expressed its excitement about the Indian market and committed to commence operations following discussions with Prime Minister Narendra Modi.

India ranks as the third-largest car market globally and has immense potential with significant room for growth in Battery Electric Vehicles (BEV); thus, the company has begun assessing potential locations for its manufacturing facility, and it has already considered two sites in Tamil Nadu.

The proposed sites include the Manalur region north of Chennai and Tuticorin in one of the state’s southernmost districts; at the same time, VinFast is also planning to evaluate plots in Gujarat, as they require access to a port, however Tamil Nadu’s East-West connectivity makes it an appealing option.

The importance of sea lines of communication (SLOCs) in the Indian Ocean is substantial, as these routes facilitate maritime cargo transportation and Tamil Nadu stands out for its three major ports, including Chennai Port and Tuticorin, making it a vital hub for exports and imports.

VinFast aims to invest around $200 million in establishing its manufacturing facility in India, with a goal to begin assembling vehicles by 2026.

The company views the Indian market as one with “tremendous potential” and plans to build facilities with a capacity of up to 50,000 cars per year in Phase I.

At the same time, Indonesia also has the company’s focus, where it intends to establish another facility for production in 2026, stating that both India and Indonesia offer promising opportunities due to their low EV penetration and the potential for increased adoption.

While there is not much in terms of the specific details about the Indian plant’s location and investment plan yet, however, VinFast intends to create Completely Knocked Down (CKD) facilities in both Indonesia and India as these facilities can provide access to government incentives, reduced tariffs and taxes, and access to raw materials at favourable rates.

VinFast VS Tesla
VinFast Auto was founded in 2017 and is the electric vehicle subsidiary of Vingroup, Vietnam’s largest private corporation; however, despite its smaller size compared to Tesla, VinFast is expanding rapidly and plans to compete with Tesla in the United States, where the latter holds over 50% market share.

VinFast already operates a manufacturing facility in Hai Phong, Vietnam, and is in the process of establishing its first American factory in North Carolina, with an expected annual production capacity of 150,000 vehicles in the initial phase.

VinFast is set to introduce three models in the Indian market: VF3, VF5, and VFe34; these models come with different price points; however, since they will be imported to India, the potential prices will increase.

Despite being valued at over $191 billion in August, VinFast has faced a decline in its valuation after going public; the company is backed by Vietnam’s wealthiest individual, Pham Nhat Vuong, who owns Vingroup, a major conglomerate with diverse interests, including real estate, retail and health care, among others.

Vuong, who studied in Russia and started a popular instant noodle business in Ukraine in the 1990s before moving back to Vietnam, has a net worth of $4.7 billion and his company, Vingroup, contributed 1.5 per cent to Vietnam’s GDP in 2021.

VinFast’s choice to follow the CKD route, rather than Tesla’s approach of local manufacturing, offers various advantages, including a quicker market entry, reduced initial investment, and adaptability to market demands.

This strategy aligns with that of Chinese electric vehicle giant BYD, which sells its popular Atto 3 and E6 models nationwide. BYD currently sells nearly 200 units a month, while market leader Tata sells almost 6,000 electric vehicles monthly on the back of its popular models, such as Nexon and Tiago.

The Last Bit,
As VinFast is looking to establish a manufacturing facility in India, it is evident that the company views India’s diverse and rapidly growing market as a crucial part of its global expansion strategy.

With a keen focus on accessibility to ports, VinFast’s choice of Tamil Nadu as its potential base because of its strategic importance of sea lines of communication in the region may very well be the reason why Gujrat may lose out on this opportunity.

While the company initially plans to import its models, it remains inclined to adapt to market conditions and shift towards localized manufacturing as demand and opportunities grow, and India emerges as a favourable destination poised to become a central manufacturing hub for all renowned brands.