VinFast Auto Ltd. Q1 FY2024 earnings call

Broader Industry Context

• Acknowledged macroeconomic and geopolitical uncertainties impact EV businesses globally, but confidence in EV industry's medium and long-term prospects remains strong due to supportive government initiatives and EV market transition to mass adoption.
• Focus on EV over plug-in hybrid or gasoline cars to leverage low-cost manufacturing, mature supply chain, and share platform for green mobility transition.

First Quarter Progress

• Delivered 9,689 vehicles in Q1, up 444% y-o-y; majority of sales domestic but saw uptick in US with $249 per month leasing deal on VF 8.
• Confident in full-year delivery target of 100,000 vehicles, supported by showroom ramp-up and new models targeting wider customer base in new markets in H2 2024.

Dealership Distribution, New Markets, and Product Deliveries

• Pivoted to hybrid distribution strategy in Q4 2023, with steady progress in developing dealership network. In North America, active distribution network includes 15 VinFast-owned showrooms in California, etc., and signed 10 more dealership agreements in US.
• Explored dealership partnerships in other regions like South/Southeast Asia, Middle East, Africa. In Asia, made progress in Thailand (official launch, LOI with 15 initial dealers), India (broke ground on EV manufacturing facility in Tamil Nadu), and Indonesia (started opening orders for VF e34, opened first dealer store in Greater Jakarta).
• Completed merger with VinES Energy Solutions, started building exclusive charging network in Vietnam and working with partners overseas; Founder established V-Green for charging infrastructure development.

In the first quarter of 2024, VinFast Auto had revenues of $302.6 million. Year-over-year, revenue increased by 269.7%, but it was a 31% decline from the previous quarter. The gross loss in the first quarter was $150.8 million, equivalent to a gross margin of negative 49.8%. Vehicle deliveries in the first quarter were 9,689 vehicles, representing a year-over-year increase of 444%. The best-selling models were the A-segment VF 5, which accounted for about half of deliveries, followed by the VF 8 and VF 6. VF 6 has been well received since its late December launch, and the VF 3 is under development for local Vietnam launch in 2024 and overseas from 2025 onwards.

• Full-year delivery target of 100,000 vehicles remains; majority of sales expected in second half of 2024 with first half focusing on foundation work like production ramp-up, new product launch, and finalizing dealership agreements.
• Aim to achieve gross profit margin breakeven by the end of 2025.

• Macro-economic and geopolitical uncertainties impacting businesses and consumers globally.
• Potential market demand fluctuations in different regions.
• Infrastructure challenges in some markets where EV adoption is in early stage.

Q: How do you plan to achieve 100,000 EV guidance while Q1 is only slightly more than 9.3%?

A: Low price products to be added in coming quarters, broader customer base targeting combined with growing dealership network and market expansion will drive sales growth in second half. Q1 performance in-line with internal forecast, first half focuses on foundation for second half growth like signing dealer agreements, opening showrooms, and completing product development.

Q: How many of your deliveries in Q1 came from GSM?

A: Vietnam remains key market in Q1, GSM in Q1 is about 52% of total delivery, less than last year.

Q: Can you disclose the profit from e-scooters versus EVs, maybe even just directionally?

A: E-scooters have been in market longer, time to optimize, e-scooters getting to breakeven, profit on EVs picking up.

Q: When is your target going to reach gross profit breakeven? Has anything changed with recent EV pricing pressures?

A: Remain to target gross profit margin breakeven by 2025. Some models might return profit earlier, but overall 2025 is target. Assessing market conditions, adopting flexible go-to-market approach due to diversified market targets to stay competitive.

Q: Could you make sense to focus on growing in fewer markets to focus on volume growth, and expand market later?

A: Continuously evaluate entry into markets, focus resources on important markets, but have opportunity to play on global field due to trade agreements, and will roll out to multiple markets where possible.

Q: How important is Indonesia on the growth plan, especially this year?

A: Indonesia is one of key important markets, large market with over 350 million people, very low EV penetration, part of ASEAN, focused on since beginning of year.

Q: Can you speak to some of the feedback you're hearing from those dealers, what the new potential dealers are excited about, what some of their hesitancies might be, and the overall tone of those conversations?

A: Signed 10 more dealership agreements in US, have robust pipeline of showrooms. Feedback positive, customers good on products, dealers excited and cooperative, also receive constructive feedback to improve offerings.

Q: How should we think about gross margins throughout this year and maybe early into next year, understanding that the higher volume vehicle deliveries will come in the second half?

A: Believe close to gross margin breakeven for whole portfolio by end of this year, early next year. More mature products like VF e34, VF 5 in Vietnam get there faster, newer products in newer markets with smaller volume slower, but whole portfolio heading to positive gross profit margin early next year.

Q: How should we think about liquidity and potential capital raising opportunities throughout the year?

A: Still have $1.8 billion liquidity reserve including cash on hand and grants, haven't tapped into it yet. Have multiple fundraising in pipeline for projects, will discuss more as they materialize, but plan investment spending accordingly.

Q: Any updates on the North Carolina facility and is that still on track for middle of next year?

A: North Carolina still ongoing, on track to start operation by end of next year, start hiring workers and putting in operations by end of next year, full operation taking couple of months.

Q: Could we see you guys try and pull that factory forward? I guess just broadly speaking as well, how are you thinking about the strategy for that market given, you know, the construction is ongoing at the facility today.

A: Benefit from EV policy in India, factory cleared land, started construction, implementing frugal CapEx plan with 50,000 CKD factory, can scale up as needed. India market important, consumers price sensitive, but wide range of products and industry-leading warranty provide comfort.