Written by Ben Kleiman
(Reuters) – Vietnamese electric car maker VinFast, which made a huge splash this week when its shares debuted on the Nasdaq stock exchange, has sparked a mixture of caution and interest among traders with a recent change in how its vehicles are distributed in the U.S. market. .
The automaker, which has shipped nearly 3,000 vehicles to North America since late last year, said Tuesday it was changing its distribution model, which was based on Tesla’s direct-to-consumer approach.
Now you want to sell through merchants too.
Several US dealers contacted by Reuters are open to the idea, but said they need to hear more details about VinFast’s plans, including the sales strategy, dealer requirements, the company’s parts distribution plan, and the vehicle warranty.
“Is there room for more brands? Yes, there probably is. It’s too early to tell,” said George Glassman, president of Glassman Automotive Group, which sells five auto brands outside of Detroit. “I will need to see more before I can make an intelligent decision.”
VinFast made its US market debut on Tuesday and shares rose, at one point giving the startup a market valuation of $85 billion — well above Ford or General Motors at the time. Since then, VinFast shares have plummeted, dropping 17.2% to $24.92 at midday Thursday.
As VinFast ramps up its efforts, it faces difficult tests. The new hybrid sales plan is just another challenge, and the luxury automaker is already talking to dealers.
“Opening our stores is great, but it takes a lot of time,” CEO Le Thi Thu Thuy told Reuters on Tuesday. “Joining forces with other partners to move forward faster has always been our nature.”
Officials at VinFast, which opened 122 showrooms globally as of June with most of them in the western US, did not immediately respond to requests for more comment on the dealership strategy.
American dealers said there are plenty of unanswered questions, including how VinFast distributes the parts needed to make repairs.
The devil is in the details
“The dealer should care about his (own) reputation,” said Scott Fink, CEO of Fink Automotive Group, which owns VW and Subaru stores near Tampa, Florida. “If I sell you a car and you can’t get a fender, you’re going to be mad at me. I won’t.”
“The devil is in the details.”
While Tesla has established itself as a leader in the electric vehicle market, other startups have struggled to get off the ground, dealers said. Moreover, VinFast will compete with established brands with its electric vehicles, including GM, Ford and Hyundai.
“The first thing you have to look at is are you going to be around in five years? That’s a huge concern,” said Andrew DeFeo, Hyundai dealer manager in St. Augustine, just south of Jacksonville, Florida.
Several merchants said that VinFast may need to offer merchants enhanced profit margins to account for the additional risk. Furthermore, the automaker may need to offer industry-leading warranty coverage on its vehicles to reassure buyers.
Those possibilities leave industry consultant and former GM CEO Warren Brown cold.
“It’s a death strategy,” he said of the plan to use dealers. “There is a lot of value that is extracted by serving traders. This is a strategy that Wall Street will hit them with.”
With dealerships selling at historic prices, enough dealer owners will bet, said Rhett Rikaart, CEO of the Rikaart Automotive Group in Columbus, Ohio, which sells 10 auto brands. Many also appreciate that VinFast builds an American factory.
Dealers also said the lack of a well-known name isn’t a deal breaker as Toyota, Honda and Hyundai all started small and grew into successes.
“If it’s a good product and they get a great warranty on it, Americans will buy it,” Rikaart said.
In the end, dealers are always looking for unique opportunities, said Bo Buckman, president of Galpin Motors, which sells 12 brands in the Los Angeles area including the EV startup Polestar.
Boeckmann, who visited VinFast’s factory in Vietnam last year and met CEO Thuy, remains open to the opportunity.
“The merchants are businessmen and they are risk-takers,” he said. “Sales people love to be sold.”
(Reporting by Ben Klayman in Detroit; Additional reporting by Phuong Nguyen in Hanoi; Editing by Matthew Lewis)