VinFast Auto (NASDAQ:VFS) is a leading EV manufacturer in Vietnam. After seeing significant success in its home country, VinFast is hoping to break into larger Western markets with its range of EV sedans and SUVs.
While VFS is down by about 10% in the last three months due to trade tensions and general market volatility, the stock has still delivered a return of 22.8% over the last 12 months.
Let’s look at VFS to see if the EV stock is a good buy now for long-term growth and returns.
53,139 Reasons to Buy VinFast
In Q4 of 2024, VinFast delivered an impressive 53,139 EVs, a gain of 143% from the year-ago quarter. Q4 represented over half of the total 2024 deliveries, which were up 192% from 2023. Revenue followed suit, rising by nearly 58% to $1.81 billion for the full year.
VinFast’s problem at the moment, though, is its rapid rate of losses. Last year, it posted a net loss of $3.18 billion. While it’s not unusual for a vehicle startup to post steep losses alongside rapid revenue growth as manufacturing capacity scales up, the fact that VinFast is still so far from profitability could raise concerns about its ability to generate earnings for investors anytime in the near future.
VinFast’s Growth Potential
Right now, VFS’ appeal as an investment hinges on the company’s ability to keep posting high rates of growth. Certainly, VinFast’s leading position in the Vietnamese EV market is a good starting point for the company.
Vietnam has been delivering strong economic growth amid a shift toward market-oriented economics and rising demand for manufacturing capacity in Southeast Asia. Demand for EVs in the country is also booming thanks to a combination of government support for cleaner transportation and more interest from consumers.
VinFast’s long-term potential, however, will likely be unlocked in the European and North American markets. It’s already selling through a small network of dealerships in the United States and is planning to expand its European presence. With EV demand gradually rising, VinFast could have a long growth runway ahead of it in these critical markets.
VinFast management has set the goal of doubling its deliveries in 2025, something that may prove challenging in what is increasingly looking like a tough year economically. In part, this effort will be supported by VinFast’s growing presence in the Philippines and Indonesia. By the end of this year, VinFast plans to have over 60 dealerships operating in the Philippines.
How Badly Will Tariffs Hurt VinFast?
One of the most obvious risks facing VinFast right now is the impact of the Trump administration’s new tariffs. While the 90-day pause implemented after the market’s drastic reaction to the tariff announcement last month is still in force, the original rate the administration planned to levy on Vietnamese imports was 46%.
Even with the pause in effect, Vietnam is subject to the standard tariff of 10% that has been imposed on virtually all non-Chinese imports. If the US and Vietnam can’t finalize a trade agreement by the end of the 90-day pause, it could become uneconomical for VinFast to sell its cars in the US market.
Unfortunately, VinFast also lacks a US manufacturing footprint that would allow it to bypass the tariffs. Though the company does plan to open a factory in North Carolina, it announced last year that it would put that project on hold until 2028. This could leave the company extremely vulnerable to the protectionist trade policies being adopted by the United States.
China’s EV Dominance
Another problem investors may want to consider when looking at VFS is China’s emergence as the world’s dominant EV exporter.
Thanks to the success of companies like BYD, Chinese electric vehicles are now a major export item. While VinFast will very likely retain its edge in Vietnam, Chinese EV manufacturers could blunt the company’s efforts in Europe and in other Asian markets.
It’s also worth considering the technological edge Chinese EV makers are increasingly gaining on smaller producers like VinFast. BYD, for example, recently unveiled its latest fast-charging technology, allowing vehicles to charge in as little as five minutes.
As the Chinese EV market continues to develop, this technological edge could make cars from BYD and other companies more attractive to consumers than VinFast’s comparatively new and lesser-known lineup of vehicles.
Is VFS Stock Cheap To Buy Now?
At the end of the day, the retreat in VFS share prices doesn’t seem to fully reflect the elevated risks that the company faces in today’s economic environment. With shares only down about 10% in the last three months, there’s plenty of room for further volatility ahead if a trade deal isn’t struck between the US and Vietnam or if general weakness hits the company’s sales.
The company is also still far from becoming profitable and faces large competitive risks, both of which could work against it as it attempts to grow and penetrate new markets.
With that said, it’s worth noting that the limited field of analyst price forecasts for VFS does take a more positive view of the stock’s potential. The average price target for VFS is $5.83, with the lowest currently at $5.50.
Given that the stock last closed at just $3.50, these forecasts imply a return well in excess of 50% over the next 12 months. While it may be unwise for investors to count on such massive upside, it’s clear that the analysts covering VFS still have a fairly positive view of the company’s potential.
Right now, VFS may be interesting to some extremely risk-tolerant investors hoping to find outsized returns in the EV market. Between its steep losses and vulnerability to macroeconomic and competitive risks, though, VFS doesn’t look particularly attractive at the moment. Though VFS shows some early promise, investors may want to wait for signs of improved profitability and a clarification of the global trade situation before taking a chance on VinFast.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.