VinFast Auto Ltd. Q3 FY2024 earnings call

• Vietnam market: Became the market leader in Q3, with VF 3 and VF 5 driving strong retail sales growth. Traditional taxi operators are adopting EVs due to cost benefits. Car ownership in Vietnam is low with potential for growth as the middle class expands.
• International markets: North America's strategy is paying off with a growing dealer network and new models like VF 9 added. Indonesia saw first deliveries of VF e34, VF 5, and plans for VF 3, with battery leasing and ecosystem as key pillars. Philippines is using a similar ecosystem approach. Global showroom count increased to 173, with 50% of international showrooms dealer-owned. Charging network has over 1 million points globally.
• Recent support: Received restructuring and financial support from Vingroup and Mr. Pham Nhat Vuong to equip for growth and profitability.

In Q3 2024, VinFast delivered 21,912 EVs, a 66% quarter-over-quarter and 115% year-over-year increase. E-scooter deliveries in Q3 were 18,894, a 44% sequential increase and a 33% year-on-year decrease (excluding GSM deliveries, it was a 118% increase). B2C electric car sales grew 163% quarter-over-quarter and 497% year-over-year. In Vietnam, retail sales grew 159% quarter-over-quarter and 504% year-over-year in Q3 2024 due to VF 3 and VF 5. International markets saw approximately 9% of deliveries in Q3 2024 versus 3% a year ago. North America had its best September ever with a growing dealer network, and Canada had three consecutive months of growth. The accessible segment including VF 3 and VF 5 accounted for 35% of Q3 revenue.

• Reiterated the 80,000 vehicle delivery target for 2024. With 9 months accounting for 55% of the full-year target, expected to finish strongly. Confident in hitting the target due to momentum in October and November. 2025 plans include further expansion in international markets and continuing growth in domestic market.

Actual events or results may differ due to a number of risks and uncertainties. Refer to the cautionary language and risk factors in the most recent filings with the U.S. Securities and Exchange Commission.

Q: Can you share any color on your confidence in hitting the full year 2024 target?

A: We're very confident about hitting the 80,000 targets, especially having seen October and November numbers. We had robust Q3 numbers, became number one in Vietnam, and saw good momentum in North America and Canada. We expect momentum to continue through Q4.

Q: You have talked about BOM optimization for the last two quarters. Can you share more specifics on what areas you are focused on with regards to BOM optimization, and how does this impact your EV architecture?

A: We have planned initiatives for BOM optimization undergoing testing and validation. Optimizing and upgrading electric-electronics architecture is complex with safety as a priority. We also work with suppliers for better terms, optimize features like ADAS, and source components better.

Q: Just wondering if you wouldn't mind just walking us through the liquidity one more time. Just given the recent US$3.5 billion capital injection. Can you maybe just remind us when you're expecting, I guess just when you're expecting to receive this and what is the expected cash runway as a result of this recent capital raise?

A: The injection of US$3.5 billion takes over a two-year period to 2026. At the end of Q3 2024, we had US$79 million in cash and US$968 million in e-lock facilities. We expect conservatively that our cash burn to be roughly in line with historical spend. The capital injection will go into CapEx and debt repayment.

Q: There was a very good improvement in gross margins this quarter. Just wondering if you're still on track to achieve positive gross margins next year and kind of what that path between here and there might look like?

A: For now, we still maintain our forecast for 2025, and 2026. We are in the middle of the budget season right now, and making changes to the five-year plan. So, we expect that we're going to be able to provide more guidance at the end of this quarter.

Q: I wanted to follow-up on some of the comments in the press release about the responding to increasing demand. But the new EV facility in Vietnam, the completely knockdown concept. I guess I'm just curious to get a little bit more color, on kind of the rationale for that facility. It seems like it's just going to be to manufacture the VF 3 and VF 5, which makes sense given the demand you're seeing. I guess I'm just curious, kind of why pursue this route, and kind of just the strategic rationale here for this new facility?

A: We still have a backlog for VF 3. We've been trying very hard in the last months to deliver on the backlog orders of VF 3, but we don't think we'll be able to finish it this year. And the demand for VF 3 and VF 5 continue growing. These are the best-selling models for Vietnamese market. Having seen the other markets like Indonesia, like the Philippines, we see the same trend as well. So this CKD factory dedicated to VF 3 and VF 5, is to meet the growing need, for those affordable models.

Q: In the nine months 2024, what is the contribution of the Vietnamese market, to overall car deliveries for 2025? How many EVs or expected growth versus 2024, do you project to deliver? And what will be the projected split between Vietnam and international markets or B2C and B2B channels?

A: Nine months 2024, Vietnam contributed around 90% as the markets continue to be a stronger foundation, driving our growth. We are in the process of reviewing 2025 business plan and the budget. We will not providing the formal guidance, until around end of this year or early next year. However, what we can share, is that we expect increasing market share in Vietnam, to be one of the strategy starts would continue.

Q: Can you elaborate more on the finance lease for the new factory?

A: The new facility, is on the long-term lease structure similar to the sales lease by, cutter structure where we don't have to invest initial capital, and we pay the lease on annual basis. And we have the option to buy back - to have the option to buy the facility from the lessor in the future. This structure allows VinFast to carry out prudent management of capital, and enabling the company to allocate resources efficiently, while balancing growth and profitability.

Q: Can you comment about your ASP? Is VinFast overly focused on lower price models and targeting lower income countries?

A: In Q3, ASP was US$21,000 per unit, compared to US$24,000 per unit in Q2, a decline of over 10% in ASP, driven primarily by we introduced VF3 into the mix. We expect ASP to remain range during the early adoption stage, where customers tend to prefer small cars, low price tasks to explore and experience. We expect ASP to pick up once the early adoption wave is done. Our objective introduction of the more affordable models, is to capture a particular underserved cohort of consumers that prioritized value in both dollar terms and environmental impact.

Q: Exciting to see that VinFast introduce another model in North America, especially at the time when your peers seem to be retreating or putting their EV plans on hold. Can you share what the initial dealer feedback has been on the VF 9 and, which models will the VF 9 be competing with, is your target demographic for the VF 9 different from the VF 8?

A: Vietnam has been a long awaiting model in the U.S. Originally two-third of the pre-orders in the U.S. were for the VF 9. Vietnam is one of the very few seven-seater, three row electric car models on the market. Adding the VF 9 will help us widen the customer base in North America market where there are currently quite limited choices for quality and reasonably priced three row EVs.

Q: Can you share the deliveries to GSM in the third quarter '24 as well the guidance for future deliveries to GSM?

A: For GSM in Q3, 2024 account for 22% of the total volume less than the Q1, because you - as you may remember that in Q1, GSM accounted for 46% of the total volume. So in the total nine months of the 2024 total volume from related party is much less significant than it was in last year 2023, like 38% versus 72%. We expect our GSM contribution to the VinFast revenue, will be less significant in 2024, compared to 2023.

Q: So can you talk about what the - as we think about 2025, what the ramp is going to look like when you think about in Indonesia in the U.S. Like is that going to be something where it's more of like a second half ramp? Or first, can you just maybe talk about as much as you could explain as we go into 2025?

A: 2025, we still think that Vietnam in will contribute a significant path to the deliveries in the year. And it's actually a good thing that we have Vietnam as the whole market, the deflation market that allow us to get closer to profitability. We also expect - we just barely started in Indonesia in the Philippines. Next year, we're opening in India. We continue having traction in North America, the Middle East as well. So we believe that next year, we're going to expand further in international markets. We need to balance between growth and profitability. So that balancing act will continue into next year as well.

Q: Could you let us know how you intend to be competitive overseas when it comes to charging and related services?

A: At VinFast, we see services as a very important factor for the EV experience. We keep repeating good quality products, affordable pricing and excellent after-sales service. VinFast vehicles have access to more than 1 million charging points all over the world. The VinFast app aggregates and simplifies the public charging user experience, update live data to every minute, and allowing the user to plan the charging routes, and easily pay as you go for charging within the app.

Q: What are the main international markets contributing to sales in nine months 2024 and, which models are driving those sales?

A: For the international markets contributing the main to the sales in nine months 2024. We account for the North America. The model is to VF 8 at a sold model. But we have just introduced VF 9 to this market. And we see that the North American market now has started to pay-off that, for the calibration that we made. In September, September was also the best month in the high history has been for North American market, thanks to our full growing dealer network and continuous improvement in our EV. Taking Canada is an example. We observed three consecutive months of growth in July, August and September.

Q: What are the key milestones we should be on the lookout for the remaining months of the year or heading into 2025?

A: In 2025, continue focusing on domestic market. Diversify product offering in North America with VF 9 and upcoming VF 6 and VF 7. Indonesia strategy includes battery leasing and GSM launch. Philippines to follow similar approach. New CKD facilities in Indonesia and India coming online. Planned first ever Investor Day in the first half of 2025.