The electric vehicle (EV) industry is facing significant challenges, with even established players like Tesla (NASDAQ:TSLA) experiencing a year-over-year decline in Q1 deliveries, indicating a slowdown in demand for electric cars. Startup EV companies, including VinFast (NASDAQ:VFS), have been particularly hard hit, with many facing bankruptcy or closure.
VinFast, a Vietnam-based company, went public in the U.S. through a special purpose acquisition company (SPAC) merger last year, experiencing a surge in stock price to $93, giving it a market cap exceeding $200 billion. However, the company’s stock has since plummeted to near-record lows.
VinFast Stock Forecast: Analysts Bullish Despite Decline
Despite the stock’s poor performance, all four analysts covering VinFast rate it as a “Strong Buy.” The mean target price of $10.50 is significantly higher than current prices, with some projections even tripling the current price level. However, this optimism contrasts sharply with the stock’s downward trajectory.
Reasons Behind VinFast’s Decline
Like many other EV stocks, VinFast has experienced a sharp decline, losing over 51% in 2024. This trend mirrors that of other EV companies such as Rivian (RIVN) and Lucid (NASDAQ:LCID), as well as Chinese EV stocks like Xpeng (NYSE:XPEV) and NIO (NYSE:NIO). The industry is grappling with overcapacity, leading to price wars and profit margin erosion, exacerbating losses and cash burn among startups.
VinFast Faces Cash Burn Challenges
VinFast’s cash burn has been substantial, reaching $3.3 billion in 2023 and $2.2 billion in 2022, leaving the company with minimal cash reserves. Reliance on cash infusions from its parent company, Vingroup, raises concerns about long-term sustainability, mirroring similar challenges faced by Lucid Motors despite backing from Saudi Arabia’s sovereign wealth fund.
Assessing VinFast’s Prospects
VinFast faces several challenges, including heavy reliance on sales to a single entity and lukewarm reviews of its products compared to competitors like Rivian and Lucid. Despite plans for expansion into the SUV market and localization of production, VinFast’s valuation metrics appear high compared to other EV players, casting doubt on its competitive advantage and long-term viability.
Conclusion
In an increasingly crowded EV industry, VinFast’s future remains uncertain. While the company has ambitious plans for expansion and localization, its current challenges, including cash burn and competitive positioning, raise questions about its ability to succeed in a highly competitive market. Investors should carefully consider these factors before making investment decisions in VinFast.
Featured Image: Unsplash
Author Faith Yakubu 
