A tiny EV manufacturer called VinFast, supported by the biggest conglomerate in Vietnam, is branching out into the Indian market. In addition to constructing a statewide network of dealerships, the firm hopes to create a $2 billion electric vehicle plant in Tamil Nadu. To cash in on the increasing demand for electric vehicles, VinFast plans to provide more reasonably priced alternatives to Tesla in India's market. As one of the pioneering EV-only enterprises in India, VinFast may have a leg up in the heavily contested Indian EV market.
Despite temporarily being the world's third most valuable automaker last year—behind General Motors and Ford Motor—a tiny, unprofitable electric vehicle (EV) producer is now making its way into India. The company's stock soared roughly 700% days after it was listed on Nasdaq.
The largest corporation in Vietnam, Vingroup, is behind the 2017-formed VinFast Auto, which started manufacturing electric vehicles in 2021. Based on information from sources, ET has claimed that the groundbreaking ceremony for its $2 billion integrated EV factory in Thoothukudi will take place on February 25. An assembly plant for VinFast kits will be established.
VinFast views Tesla as a competitor, despite Tesla's larger size. It is planning to challenge Elon Musk's company, which has over half of the US market share, and is growing rapidly to do so. The Vietnamese city of Hai Phong is home to VinFast's current production site. The corporation began construction on its first American plant in North Carolina on July 28. The initial phase of the facility's production capacity is anticipated to exceed 150,000 automobiles per annum.
By 2023, VinFast had delivered 34,855 electric vehicles. The EV manufacturer began operations in 2021 and has since distributed 42,291 electric vehicles worldwide.
Plans for VinFast in India
Even though EV penetration is limited in India, VinFast is launching there just as the country is about to embrace EVs widely.
It is VinFast's plan to launch a nationwide dealership network in addition to constructing the production facilities in Tamil Nadu. Our goal is to quickly engage with customers across the country and develop a strong brand presence using this strategy. Given that VonFast has settled on Tamil Nadu as the site of its factory, the company is considering expanding its exports to markets in Southeast Asia.
Although VinFast isn't as well-known as Tesla, its vehicles are considered as more reasonably priced alternatives. Experts predict that VinFast will do well in the Indian market because to its affordability and good value. "In contrast to Tesla's direct-to-consumer sales model, VinFast differentiates its models for different markets and adopts a multi-channel distribution strategy," said Ashwin Amberkar, an automotive analyst at Canalys, in an interview with ET last year. "In India, VinFast is likely to follow a comparable strategy."
In the premium market, VinFast may find success. With the premiumization of the Indian vehicle industry, it may undercut Tesla and other European luxury brands in terms of pricing while still offering premium amenities.
Based on information from sources, ET reported last year that VinFast might start with two or three e-SUV models from its current lineup. A small SUV crossover, a full-size car, and further variants would follow.
Several sources close to the matter have revealed that the VF e-34, a small SUV crossover, will be imported as the initial model. In the first stage, local assembly will be carried out for the following e-SUVs, including VF e-36, VF6, and VF7, before local manufacture of a small number of them starts.
The geographical landscape of India
When the electric vehicle market in India is still in its infancy, VinFast is making its debut. Sales increased slightly from 2.1.28% in 2021 to 2.3% in 2023, according to Jato Dynamics, the market research firm. Sales in 2021 were 0.48 percent.
Barnik Chitran Maitra, managing partner at Arthur D Little, India and South Asia, had previously told ET that any electric vehicle manufacturer looking to break into the four-wheeler segment in the Indian market would face a challenging environment. "If viability is a concern for e-scooters, concerns about range and charging infrastructure are problems for e-cars."
He went on to say that, with demand so low, there needs to be investment in both the front and back ends to pique consumers' interest in purchasing EVs.
But now might be VinFast's chance to get into the Indian market. An analyst at a management consulting firm had said ET that, due to the low entry barrier in electric vehicles and the lack of Chinese manufacturers in India, companies from countries other than China had a good chance of being successful in India.
The market share of electric cars in India is more than 80% held by Tata Motors, with MG Motor of China and Mahindra & Mahindra of India rounding out the top three competitors.
Bain & Company and Blume Ventures projected that by 2030, the electric vehicle (EV) market in India might reach $100 billion in revenue, with a penetration rate of more than 40%. Forecasts indicate that the penetration of four-wheelers (cars) will exceed 20%. The results demonstrated that new product development, go-to-market/distribution, software development, prioritizing client segments, and charging infrastructure are the five themes that require structural problems to be resolved in order to realize this potential.
In India, hybrids are quickly replacing EVs. Hybrids, which combine combustion and electric engines, are more popular among Indian consumers than BEVs, or electric vehicles driven only by batteries, which goes against the grain of worldwide trends. They choose to start with a more manageable technology and learn about alternate fuels before committing fully to EVs. Automakers have been capitalizing on this trend by releasing 51 new hybrid models in 2023, compared to only 29 new electric vehicle models. This strategy has been successful in attracting customers in India.
The decrease in maintenance costs, increased affordability, and dependable performance of hybrids have made them popular choices. In the meanwhile, the electric vehicle ecosystem must work tirelessly to resolve issues with short range, inadequate charging infrastructure, and high insurance costs in order to improve the electric vehicle ride in India.
Being the first electric vehicle (EV) firm in India gives VinFast a leg up in the competition, especially when compared to international rivals like Tesla, which is eyeing the Indian market for expansion.
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