Vietnam’s Richest Man Bets $2B to Sell Cars to Americans

https://www.bloomberg.com/news/articles/2019-12-09/vietnam-s-richest-man-bets-2-billion-to-sell-cars-to-americans

by danso • 7 years ago

103 152 7 years ago

neonate• 7 years ago

https://outline.com/https://www.bloomberg.com/news/articles/...

tabtab4• 7 years ago

He has one advantage that past failed attempts didn't: electric cars are relatively simple compared to combustion engine cars.

But American consumers will want to see roughly 5 years of reliable quality reviews before they trust the brand. Problems with Yugos and early Hyundai's left a trail of memorable Internet memes.

So, what do you do the first 4 years? That's a lot of years to take a loss in order to gain market share.

Maybe start in the rental markets by loaning the cars out to rental shops. If they are loaned on a short-term basis, then the rental shops won't have to eat quality problems, if they appear.

One thing they have to know: if you foul up quality early, it takes a long time to recover that reputation. Detroit brands are still recovering from the clunkers they made in the 70's and 80's. They are now on par with the Japanese brands, but that's not good enough to get a clean reputation. Hyundai had to include generous extended warranties AND low prices to restore their reputation and market share.

lostapathy• 7 years ago

Decent idea but wrong description. Hyundai and Yugo has problems decades before “internet memes” were a thing.

aidenn0• 7 years ago

USENET meme then?

wffurr• 7 years ago

That's a really narrow conception of "meme". If you think of it as the brand's reputation, and widespread jokes, anecdotes, etc. then it's spot on.

fnord773• 7 years ago

electric cars are relatively simple compared to combustion engine cars.

It's not really an advantage, though. Established makers have that same advantage, with the addition of having established dealer and service networks, established reputation, and so on.

He's about 10 years late to the EV party

blhack3• 7 years ago

Buy up a few parking lots in a few major metros and let people unlock the cars with an app on their phones as short term rentals.

The vehicles will probably end up as a loss, but it's going to get a lot of press. Then start selling them. Make the parking lots into car dealerships. Put them in college towns where people are just starting to get real jobs and have money to spend, and are also very online.

scythe• 7 years ago

This is clever, but I think you could get a similar result with fewer dedicated internal staff (better for a company with no US ops) by leasing or selling vehicles to e.g. ZipCar.

tabtab4• 7 years ago

Do you mean sell the cars to students? It's same problem: they will probably prefer very used cars from known brands over slightly used cars from an unknown brand.

standardUser• 7 years ago

"American consumers will want to see roughly 5 years of reliable quality"

You say that as if it's gospel, but it sounds like "boomer thinking" to me. The demand for electric cars over the next ten years will mostly come form people who have different ways of making purchasing decisions than in decades past. And they've never heard of a Yugo.

dahdum• 7 years ago

I don’t think researching a $40k purchase and valuing reliability is “boomer thinking”. It’s a side effect of people getting married, buying homes, and starting families.

kube-system• 7 years ago

The average age of a new car buyer in the US is 53 years old, so maybe you're on to something...

Igelau7• 7 years ago

That might have been true once, but I suspect this small-sample history is now irrelevant due to shifting demographics. Only Boomers remember the Yugo. The rest of us are too busy trying to afford the privilege of commuting to really care where the car came from.

cgriswald2• 7 years ago

What a bizarre sentiment. If you can barely afford it you should care more. Get a reliable make and model that there are a lot of so the parts are cheap. Also, I’m not a Boomer and I remember Yugos.

Symbiote• 7 years ago

Only Boomers

Why is this term suddenly popular, especially here?

I'm downvoting comments using it, since it seems to be disparaging at best, if not offensive. It's also used inaccurately. The Yugo wasn't even produced until 1980.

zyang• 7 years ago

Detroit never stopped churning out clunkers. My neighbors brand new, $50k Chevy truck’s electrical is completely shot after first year. This is in mild Northern California weather.

nradov• 7 years ago

Chevrolet ranks 25th in reliability out of 30 mass market vehicle brands.

https://www.usatoday.com/story/money/cars/2019/11/14/consume...

o-__-o2• 7 years ago

And here my 4 year old $20k ford is still worth $12k, so maybe not all of Detroit is bad?

AnthonyMouse2• 7 years ago

So, what do you do the first 4 years? That's a lot of years to take a loss in order to gain market share.

Hyundai addressed this by offering a ten year warranty. They could do that right out of the gate rather than waiting until they have a bad reputation first.

Another possibility is to start off with a big leasing program. People aren't too concerned about repair costs or resale values for leased vehicles.

hamhand• 7 years ago

It's simple to make one that moves, but hard to make it superior to other brands.

llampx• 7 years ago

it takes a long time to recover that reputation. Detroit brands are still recovering from the clunkers they made in the 70's and 80's.

I would say that they are still recovering from the clunkers they made in the 2000s.

Detroit never really got into the quality mindset that the Japanese car makers became famous for. And they didn't get into the driving dynamics mindset of their European counterparts, except maybe a couple of Cadillac models starting with the CTS-V.

rasz2• 7 years ago

You can always tell you're in a >5 year old Dodge by the cracked dashboard, over 30 years of same never solved issue :o

rdtwo5• 7 years ago

Never really recovered, did you see the recent article on the coverup over fiesta and focus transmissions at ford. Shit like this is why I don’t buy “American” (Mexican) cars

juanbyrge• 7 years ago

Currently EVs are not remotely price competitive with ICE cars. You can get a decent new ICE car for $15-20k. But even entry level EVs seem to be $35k+. Until new EVs reach the $20k price point, I do not anticipate them going mainstream. Perhaps a new entrant like VinFast will achieve this.

toomuchtodo5• 7 years ago

Average price of a new car in the US is ~$36,718. Some consumers are taking on 6,7,8 year auto loans to pay $50k-$80k for vehicles.

It is not necessary for EVs to reach the price point you mention for adoption to take off, considering much lower fuel costs (total cost ownership). I know someone putting almost 2500 miles/month on their Model S commuting. The math worked out immediately for them to dump their Chevy SUV.

kevin_thibedeau• 7 years ago

The math already worked out for them to get a Camry. One without a massive powertrain component replacement looming after 10 years.

walrus013• 7 years ago

Some consumers are taking on 6,7,8 year auto loans to pay $50k-$80k for vehicles

which is absolutely insane in my opinion, to have a shiny quickly depreciating status symbol. the amount of interest paid over the life of a 72-84 month loan is nuts. but people are short sighted and look at the monthly loan payment amount only. dealerships of course know this, and start naive people off in the negotiating with "how much do you want to pay a month?". they'll never show an amortization table.

WalterBright2• 7 years ago

Eh, I think I'll keep my old Ford. Costs me about $500/year in maintenance/repairs. No comprehensive insurance. Car tabs are cheap because the state considers it worthless. I never worry about parking it on the street / at the airport.

saagarjha3• 7 years ago

With subsidies it’s possible to get new electric cars for $20k-25k: that’s how much a Nissan Leaf will end up being for me.

walrus013• 7 years ago

that's about the same price as a well equipped toyota prius or hyundai ioniq

fnord773• 7 years ago

the subsidies are all but gone now.

and with the current political climate in the US, I don't think they'll get revived for a while if ever.

cheald2• 7 years ago

They may not quite be there on sticker price, but depending on the cost of power and gas, TCO is already solidly in the competitive range. People aren't buying just $15k cars, either - the Toyota Camry is the most popular model in the US, and it runs $25k-$35k new based on configured options.

argonaut• 7 years ago

By comparing to the Camry you're kind of supporting their point, though. The Camry is a mid-size gas car (by length), and its top trim is the same price as a bottom trim Model 3, a compact electric car. The accurate comparison would be to a Corolla, a compact ICE car whose top trim is about $28k.

In other words, current electric vehicles are about 2 price classes above equivalently positioned gas cars, maybe 1.5 price classes if you consider TCO.

baybal2• 7 years ago

EVs may well get cheaper than ICE cars.

Battery capacity price in China is already below $100 per kwh.

EVs are simpler to engineer, have lesser parts, and supply chains for them are shorter.

At $5000-6000 per battery pack, the rest of the car will cost around $3000-4000 if you use super duper cheap Chinese steel.

More importantly, switch to electric will facilitate further physical downsizing of cars, and this will further increase the battery/payload mass ratio: EVs don't have to have engine compartment, nor structural tricks to contain heavy wobbly engine block, nor a need to provide a lot of rigidity for heavy mechanical components. A car with less "dead volumes" will of course be cheaper.

This way you may be getting 300km electric ranges even in reasonably cheap EVs in the future.

prawn2• 7 years ago

Even better if they can hit no-brainer prices for a second family car for local trips.

greglindahl5• 7 years ago

What's "mainstream" even mean? I suspect you'll find that it's a circular reference, and that people who can afford a $35k car think that it's a mainstream purchase.

blaser-waffle5• 7 years ago

Fancy for them means 70k+ Euro imports

beaconstudios• 7 years ago

Vietnamese billionaire? I thought Vietnam was a communist country?

jammygit• 7 years ago

I’m a little curious about how that works

saagarjha3• 7 years ago

I’m sure you can take a look at China for examples.

javagram3• 7 years ago

https://en.wikipedia.org/wiki/Economy_of_Vietnam

“Since the mid-1980s, through the Doi Moi reform period Vietnam has made a shift from a highly centralized command economy to a mixed economy that uses both directive and indicative planning through five-year plans.”

HNLurker23• 7 years ago

Just like Romania? Or Cuba?

huydotnet2• 7 years ago

Well, I'd only say, what you know about communist isn't true anymore in Vietnam and China (I guess, in every communist countries in the world).

Vietnam has already shifted out of the communist styl e(goverment-managed-everything) since 1986 https://worldview.stratfor.com/article/vietnams-political-ec...

tehjoker• 7 years ago

It's pretty disappointing. The Vietnamese communist party defends the Doi Moi reforms as using capitalism controlled by the people's state as a phase to increase production in the economy. This is something understandable as socialism can't be built on an insufficient industrial base and capitalism provides individual incentives to jump start it and a door for foreign investment from capitalist countries. However, other leftists critique this as revisionist and a failure of existing Marxist-Leninist models* which do not appear to incorporate true worker control of the economy.

Once you introduce capitalism without proper checks on the bureaucracy, it takes on a life of its own as the newly created capitalist class begins to advocate for itself at the expense of the people and the bureaucrats begin to see themselves as the rightful heirs of private wealth. This is one analysis I read of what happened in China.

I'm not sure who to believe, but introducing elements of capitalism is on its face a dangerous move for the Vietnamese revolution. Honestly, I'm shocked that they've let it go so far they have a billionaire. I hope they have things actually under control because they fought and bled for decades to eject imperial influences from France and America and to ensure the people control their own fate.

I'm sure a politically active Vietnamese person would have a different take than me (and certainly a multitude of takes), given they understand their circumstances better than a dabbler foreigner like myself.

* I say existing because the Soviet Union briefly attained this, but the leadership shut down the workers councils (which many saw as a betrayal). So this idea isn't necessarily inimical to Marxism-Leninism, but in practice only a sparse number of examples have been realized.

xmly3• 7 years ago

They just use communism as a disguise. Under the hood, everything is capitalism. So is China.

I always view the so-called communism in China and Vietnam is a modernization of Confucianism.

lazylizard• 7 years ago

What differentiates 1 electric car manufacturer from another? Superior driving dynamics? Superior ride? Superior batteries? Superior motors?

i_feel_great• 7 years ago

Superior marketing

Koshkin• 7 years ago

Meh, everyone knows how to do marketing. But differentiation itself is an important part of successful marketing in a crowded market. So the better answer may be, brands differentiate themselves in exterior and interior design and not much else.

ryanhuff• 7 years ago

Safety, reliability, service, fit and finish, range.

javagram3• 7 years ago

All of the above? Plus a lot of other things like styling, interior, infotainment, soundscape and sound dampening, dealership/repair network, and so on...

There’s nothing magical about electric cars that takes away all the hard parts of building a car. Look at all the maintenance issues Teslas have with falcon wing doors and so on to see the potential issues that can turn customers away even on an electric car. Just because you have an electric motor instead of an engine doesn’t mean you don’t have all the other parts of a car to deal with and tweak.

hadlock• 7 years ago

Electric cars typically have 1% the moving parts of an internal combustion engine vehicle. If the chassis is built well, you just need to swap out the motor and battery as needed, and flush the coolant every 5 years. There's no belts, chains, pumps etc for the most part to maintain or replace. The model X is pretty complex but if you look at the model 3 it's just a bunch of plug and play parts like a PC.

freehunter2• 7 years ago

What differentiates one ICE car manufacturer from another? Already they're using the same basic engine design (and often the same engine) between brands. With ICE cars it comes down to aesthetics, passenger features, and marketing. No different than EV makers.

rdtwo5• 7 years ago

Interiors and reliability

skokage• 7 years ago

I guess it depends on if we are talking about enthusiasts or the average consumer? If we are talking about the average consumer I would assume in order of importance; Reliability, vehicle range, charging time, ride quality, available technology, interior quality.

For the average "enthusiasts" seen in the comments section of Car and Driver's facebook page it would be more along the lines of; 0 to 60mph time, nurburgring lap times, 0 to 100mph times, quarter mile times, looks. But for actual enthusiasts who have an interest in Electric Vehicles i would say all the things you mentioned are fairly important. But really, to the average consumer who purchases something like a Camry or Accord, I feel as if reliability/range/technology (by that i mean things like apple car play, lane assist, and other QoL technologies) and value are really what the average person is looking for.

OnlineGladiator• 7 years ago

If we are talking about the average consumer I would assume in order of importance; Reliability, vehicle range, charging time, ride quality, available technology, interior quality.

You forgot the most important thing: price.

duelingjello• 7 years ago

You're paying for the support, trust, goodwill and culture of the brand and the particular product. PR is the conveyor belt/crafter of those ideas, it's up to how they treat you that matters.

And, if you have a problem with a new or used vehicle, call Steve Lehto, a hilarious Lemon Law lawyer I watch on YT.

https://www.youtube.com/SteveLehto

greglindahl5• 7 years ago

You can try to figure out why the current market leader in various markets is preferred: Tesla (high end), Leaf (lower end non-China), and whoever is leading in China.

If you go by HN discussions, you'll quickly find out that Tesla makes terrible cars and has no special technology, so you might want to try a non-HN source of data :-D

aianus2• 7 years ago

The software.

I want to turn my car on over the internet from my phone and heat it up 15 min before I leave the office two blocks away. Then I want to put it in autopilot for the mind-numbing straightforward freeway traffic on my commute.

I don't care what other car manufacturers have to offer if they can't do the above. And as long as it's under $60k I don't care what the price is either.

SQL2219• 7 years ago

Wow, this is a $2B mistake. Funny thing about very wealthy people, they think because they had success in one area that it will translate to success in another. Most likely their timing and luck were perfect early in their career. I don't think timing is on his side here.

LeonM• 7 years ago

Those are the exact same comments as people had on Tesla roughly 8 years back. There even was a whole website dedicated on the Tesla 'death clock', predicting when they would go bankrupt.

Only time will tell.

rdtwo5• 7 years ago

Jury is still out in Tesla, I suspect they will still go BK at some point and that’s probably the best thing that could happen to the car imo. They could take the best stuff and shed some of the debt and musk issues

huydotnet2• 7 years ago

This guy is not an ordinary walthy people who think he can success in one area so he can translate it to another. He actually succeed in way a lot area before jumping to auto making. I can't predict the result of this move but I'd say, he not that type of wealthy people.

9nGQluzmnq3M• 7 years ago

Vingroup is a classic Asian conglomerate that is already varyingly successful in half a dozen fields ranging from retail to real estate and hospitals. The key challenge is whether they can make money outside their home market of Vietnam.

xmly3• 7 years ago

First, it is good PR.

Second, the Vietnam government probably subsidizes the company for exporting, even they just claim to do so.

walrus013• 7 years ago

Even if this fails spectacularly, if he really spends $2bn it could have an effect globally on increased demand/manufacturing, and lower prices in $ per kWh for good quality lithium ion batteries.

I may be wrong on this, but as I recall, Vietnam's domestic auto industry exists because they have escalating high tariffs on foreign manufactured cars with certain engine sizes (eg: 35% tariff on foreign made 4 cyl 1.6 L, 40% or more on 2.4L and larger engines, 50% tariff on things with 3.5 to 5L engines). Similar to China.

latchkey• 7 years ago

It isn't just the size of the engine, but also type of car. When you get into the lambo territory, it is 300% markup.

That said, there is so much insane wealth in Vietnam now, it doesn't matter. You see them all over Saigon.

(I've lived in Vietnam going on 4 years now)

fnord773• 7 years ago

If anything, it seems like there are already too many automakers.

For various reason I believe FCA, Nissan, Mitsubishi and Ford are going to fail.

I can't imagine any upstart without any compelling unfair advantage/killer product is going to fair well in an imploding auto market.

If he started this endeavor 8-10 years ago, he'd have an advantage. Now nearly every car maker is either producing or on the verge of producing at least one EV model.

dsprt4cultre• 7 years ago

Swap Ford with GM and you're right on the money

bilbo0s2• 7 years ago

I think you meant add GM.

Of course, the US may sail in and prop those two up. Kind of a "Too political to fail" type thing. But on their own, absent help like that, yeah, I don't really see how they make it without some sort of market event. Failure, fire sale merger, etc.

tabtab4• 7 years ago

They are probably more likely to merge than outright fail, barring a bigger-than-normal recession.

bilbo0s2• 7 years ago

I can't imagine any upstart without any compelling unfair advantage/killer product is going to fair well

Vietnam doesn't really care too much about WTO rules, so they provide not only enormous resources to their firms through the back door, but also slap enormous tariffs on foreign auto dealers at the front door.

So yeah, what we may term unfair advantage, they call command capitalism.

Igelau7• 7 years ago

The timing could be better, but you have to understand, it's hard to find anything to do with massive wealth in Vietnam. You either start a car company or you blow it on black market Rhino horn for your hangovers.

magduf2• 7 years ago

Good riddance to FCA and Ford, though I honestly have a hard time seeing Ford fail completely given the success of their trucks in the US.

I'd be sad to see Nissan go.

I have no idea how Mitsubishi hangs on; they're just too small a player now. What they really should do is get out of the car business, and jump into the airliner business. The market is screaming for alternatives to Boeing and Airbus. Boeing has proven itself untrustworthy, and Airbus just doesn't have the production capacity to handle increased orders. On top of that, I'm sure ANA and JAL would love to buy domestically-made airliners if they could.

tim3333• 7 years ago

At least the cars look quite good https://www.vinfast.vn/themes/custom/vinfast/static/images/h...

There are 2.2 million+ Vietnamese Americans so maybe some of those will buy on principle.

whoanow• 7 years ago

Uh do they?

tim3333• 7 years ago

Well, eye of the beholder. I think they look ok.

Igelau7• 7 years ago

Eh, they look like every other car.

ulfw• 7 years ago

Right one looks a bit like an Alfa Romeo knock off to me. Not necessarily a bad thing ;)

jmpman• 7 years ago

The Vietnamese Americans I know came during the end of the Vietnam war. I don’t see them supporting a car company from that communist country.

refurb• 7 years ago

Exactly. You’d be hard pressed to find a staunchest bunch of anti-communists out there.

rootsudo• 7 years ago

Look its V for Vietnam.

sgn• 7 years ago

I don't think the Vietnamese American will buy those cars.

They still think all successful business in Vietnam has some ties with the regime (which they hate a lot).

This business is even more problematic to them since the owner is a Northerner, he had started on Eastern Europe, and his father was a military officer.

xmly3• 7 years ago

1000 bucks. I will buy one

romwell• 7 years ago

What always blows my mind is that Vietnam's richest man got rich making noodles in Ukraine[1].

Mivina instant noodles were a staple food for me as a kid. It was a very Ukrainian brand to me. I was telling my Vietnamese friend about these glorious noodles, and she told me "You know that it literally means 'Noodles From Vietnam' in Vietnamese, right?".

Turns out, Mivina is a brand of Phạm Nhật Vượng's, which grew out of his (not too successful) restaurant.

He grew the Mivina business instead, and eventually sold it to Nestle for $150M - and then 10X'd that with a resort/real estate business in Vietnam.

A pity he didn't stay in Kharkiv, I say.

[1]https://en.wikipedia.org/wiki/Ph%E1%BA%A1m_Nh%E1%BA%ADt_V%C6...

SenHeng• 7 years ago

Moral of the story, know when to pivot.

threw4324• 7 years ago

Amusingly, Nepal's (only?) billionaire also appears to have taken this route.

https://www.wealthx.com/featured/2015/the-nepalese-billionai...

bicolao• 7 years ago

You know that it literally means 'Noodles From Vietnam'

It's short for (Mi) (Vi)et (Na)m, which is basically Vietnamese Noodles. You can already guess "Mi" is noodles in Vietnamese.

albertshin• 7 years ago

Samsung started off as a small trading store / company and later became a sugar refinery. Lotte (another Korean conglomerate) started off selling gum during wartime. Even Nike initially started off with Phil Knight simply being the importer for Japanese Onitsuka Tiger shoes.

This is why I think it makes total sense for good early stage investors to invest in people and teams (as opposed to the ideas). The category or industry they're operating in today is just a small taste of what they're capable of.

dirtyid• 7 years ago

Somewhat relevant:

Bayerische Rundfunk reports that Ocean Lotus (also known as APT32), a hacking group associated with the government of Vietnam, has been detected in the networks of BMW and Hyundai. Engadget calls it cyberespionage.

mika9090• 7 years ago

Communism at its best.

rdtwo5• 7 years ago

I got to wonder how well these guys understand the us market. Low end us consumer are so deep underwater in their old car that you would need to buy them out to even allow them to switch brands.

I think if you are breaking into the car market at the low end you have to offer a total lifestyle package. Maybe a very long term lease with full maintenance program package or some other Mechanism that allows people that have no spare cash to continue operating a vehicle for a long time and build a reputation for reliability. That being said the low end is kind of a trap because you get stuck as a low end brand (Hyundai) and in the USA you need a dealer network but a low end dealer won’t be able to sell high end due to bad dealership environment.

rasz2• 7 years ago

US low end consumers lease 15 year old clunkers with GPS tracker from shadier one day late repossessing Buy here pay here outfits.

anonguy5640• 7 years ago

As a Vietnamese, if you care about the performance of the car. Think twice, maybe more.

Vietnam’s Richest Man Bets $2B to Sell Cars to Americans

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