VinFast Stock Is Dropping. The EV Maker’s Shares Are Too Expensive.

That’s more than the market cap of
Ford Motor
(F),
General Motors
(GM),
Volkswagen
(VOW3.Germany), and
BMW
(BMW.Germany). It’s even more than
Hyundai Motor
(005830.Korea) and
Kia
(000270.Korea) combined.

VinFast is also worth more than all U.S. EV start-ups combined, worth more than profitable EV start-up
Li Auto
(LI), and when including debt and cash, worth more than Chinese EV leader
BYD
(1211.Hong Kong).

It’s a lot.

There’s a lot to like about VinFast. It has the capacity to build about 300,000 EVs and is building another plant in North Carolina. It has sales, selling 11,300 EVs in the first half of 2023. It has a strong backer in Vietnam’s VinGroup. It has multiple EV models and already has entered the U.S. market selling 850 VF8 electric SUVs in California in the first half of 2023. CEO VinFast CEO Thuy Le said VinFast will roll out sales in the rest of the U.S. soon.

The VF8 is a nice EV too. The base model starts at about $46,000, can accelerate from zero to 60 mph in about 5.5 seconds, and gets about 264 miles of range per charge, based on EPA standards and testing. A Tesla Model Y, which is a similar size, with similar range and acceleration specifications starts at about $48,000.

The VinFast powertrain warranty is solid too, coming in at 10 years or 125,000 miles. The Tesla warranty is eight years or 120,000 miles. For EVs, a battery-related warranty means you will get at least 70% of the original per charge range over that span.

Still, $86 billion? There aren’t any Wall Street estimates to look at yet. No one covers the stock just yet. It typically takes a few weeks for analysts to ramp up coverage of a new stock. It typically takes Wall Street a little longer when a company raises money via a SPAC merger, like VinFast did, versus when a company raises money in a traditional IPO.

Investors, for a while, will be left to evaluate numbers on their own. Including debt and cash, VinFast is valued at roughly $4.4 million per annualized car sold. Based on the capacity to produce, VinFast is valued at about $300,000 per car. The numbers for
Rivian Automotive
(RIVN) are about $275,000 and $93,000 respectively, fractions of the VinFast amount.

In June, VinFast projected 2023 sales of about $1.9 billion. That valued the company stock at about 12 times sales. On Tuesday, the stock was valued at about 46 times projected 2023 sales.
Tesla
(TSLA) trades for about 7.3 times that number. Li trades for about 2.8 times.

Investors have to use sales because the company isn’t profitable yet. It lost about $600 million in the first quarter and spent more than $1 billion building its business.

Any numbers looked at will make VinFast appear expensive relative to its EV peers. Its SPAC merger valued the company, including cash and debt, at about $27 billion. Why shares shot up is hard to say. A small fraction of shares is available to trade, just millions out of 2.3 billion shares outstanding. Limited stock supply can lead to funny things. The better answer is likely that the stock started going up so traders piled in.

Where it will go from here is hard to say, but it will be lower eventually. Not because of anything the company did, but because of what the market did.

There will be reasons it falls. VinFast will need more capital, from VinGroup or from public investors. That means more shares get issued, diluting the ownership stake of existing shareholders.

Shares also will fall because the initial euphoria will fade. When that happens is tough to say. The market can be enigmatic.

The stock was down about 23% at $28.67 on Wednesday. That still values the company at $62 billion; that’s too much too. 

The
S&P 500,
meanwhile, was rising 0.1%. The
Nasdaq Composite
fell 0.1%.