VinFast Auto Q1 2024 Earnings Report

VinFast Auto EPS Results

• Actual EPS: -$0.26
• Consensus EPS: -$0.25
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

VinFast Auto Revenue Results

• Actual Revenue: $302.65 million
• Expected Revenue: $562.27 million
• Beat/Miss: Missed by -$259.62 million
• YoY Revenue Growth: N/A

VinFast Auto Announcement Details

• Quarter: Q1 2024
• Date: 4/17/2024
• Time: N/A
• Conference Call Date: Wednesday, April 17, 2024
• Conference Call Time: 8:00AM ET

VinFast Auto (NASDAQ:VFS) is an electric vehicle manufacturer founded in Vietnam in 2017 as a member of Vingroup, one of Vietnam’s largest private conglomerates. The company develops and produces electric passenger vehicles, electric scooters, electric buses and related battery systems and charging solutions.

VinFast’s vehicle portfolio has included electric sport utility vehicles, sedans and small urban models, with offerings designed for both the Vietnamese market and international customers. The company also operates or supports charging infrastructure and provides vehicle-related services intended to complement its electric mobility products.

VinFast serves customers in Vietnam and has expanded internationally, including into the United States and Canada. It has also pursued operations and market development in other parts of Asia and Europe. Manufacturing and corporate operations are centered in Vietnam, including the company’s major production complex in Hai Phong.

VinFast was founded by Pham Nhat Vuong, who has played a leading role in the company’s development and has served as its chief executive officer. The company trades publicly in the United States under the symbol VFS.

VinFast Auto Q1 2024 Earnings Call Transcript

Key Takeaways

• Ventas delivered 9,689 vehicles in Q1, up 444% year-over-year, and reaffirmed its full-year target of 100,000 deliveries supported by new models and showroom ramp-ups.
• Q1 revenue reached $302.6 million, a 269.7% increase YoY, with gross margin improving to –49.8% from –172.9% a year ago, and operating loss narrowing by 7.8% YoY.
• The hybrid distribution strategy gained traction with 16 U.S. dealership agreements and initial partnerships in Thailand, India and Indonesia, accelerating global go-to-market expansion.
• With a cash and financing reserve of $1.8 billion, Ventas plans $1–1.5 billion in 2024 capex for U.S., India and Indonesia plants, and targets overall breakeven by end of 2025.
• Key product milestones include VF5/6/8 as Q1 best sellers, the upcoming VF3 debut in Vietnam in 2024, VS9/7 launches in North America, a VF White pickup concept and merger with VinES for supply-chain integration.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to VinFast Auto's Q1 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session.

[Operator]

To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Nhi Nguyen. Please begin.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, operator, and good morning to everyone. My name is Nhi Nguyen, IR manager at VinFast. Thank you for joining us for our 2024 Q1 earnings conference. Joining me on the call today are Chairwoman of the Board, Madam Thuy Le, and our CFO, Lan Anh Nguyen. We will start the call with Q1 performance update and present our outlook for the year.

[Nhi Nguyen, Investor Relations Manager at VinFast]

We will reference a presentation today, which is accessible on the IR website. After management presentation, we will have 30 minutes for Q&A. Before I turn it over to Madam Thuy Le, let me remind you that some of the statements on this call include forward-looking statements under federal securities law. These include, without limitation, statements regarding the future financial and operating outlook, guidance, as well as macroeconomic, industry trends, company initiatives, and other future events.

[Nhi Nguyen, Investor Relations Manager at VinFast]

These statements are based on the predictions and expectations as of today. Actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC. In addition, management will make reference to non-GAAP financials during this call.

[Nhi Nguyen, Investor Relations Manager at VinFast]

A discussion why we use non-GAAP and information regarding the reconciliation of our non-GAAP versus GAAP is available on the press release that we issued this morning, or you can find it in the final page of our presentation. With that said, now I would like to invite Madam Thuy Le to start with management presentation.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thank you, Nhi. I'd like to start by addressing the broader EV industry context. It is important to acknowledge that macroeconomics and geopolitical uncertainties continue to impact businesses and consumers globally. As a global company, we operate in a diverse range of strategic markets, including North America, Europe, Middle East, Southeast Asia, and South Asia. While we are currently observing certain level of weaknesses in some of our markets, we view this as temporary challenges. Our confidence in the EV industry's medium and long-term prospects remain strong.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

This confidence stems from several factors, including supportive government initiatives, and the EV market's anticipated transition from early to mass adoption, and the exponential growth projected in ex-China markets. I also would like to re-emphasize our focus on EV over plug-in hybrid or gasoline cars.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

This strategy allows us to leverage our low-cost manufacturing base, mature supply chain, share platforms, and to stay true to our mission to play an impactful role in the push for transition to green mobility and carbon neutrality. EV is a better choice to make it happen. Now, let's turn to our progress in the Q1.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We entered a number of new markets and increased vehicle deliveries across our global markets. We delivered 9,689 vehicles during the Q1, representing a year-over-year increase of 444%. While the majority of our sales this quarter was domestic, we saw an uptick in the U.S., spurred by a special leasing deal of $249 per month on VF 8.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We remain confident of our full-year delivery target of 100,000 vehicles, supported by the robust ramp-up of showrooms and the availability of new models, targeting a wider customer base in multiple new markets during the second half of this year. For the Q1, our best-selling models were the A-segment VF 5, our current most affordable option, that was launched last year, which accounted for about half of our deliveries, followed by the VF 8 and the VF 6.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Our VF 6 model has been well received in the local market since its launch in late December last year, and we are excited for the addition of this model to overseas markets, where options for affordable and good quality EVs are still limited. Now, I would like to share some updates on three fronts: dealership distribution, new markets entrance, and new product deliveries.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Since we pivoted to the hybrid distribution strategy in the Q4 of 2023, we have made steady progress in developing our dealership network. Our capital-light model is steadily accelerating our global go-to-market strategy and will support both our sales growth and cash position. At the end of the Q1 in North America, our active distribution network includes 15 VinFast-owned showrooms in California, two showrooms owned by Leith Automotive Group in North Carolina and Kansas, and other VinFast-owned showroom in Canada.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

In the U.S. alone, we completed the signing of another 10 dealership agreements besides the pre-existing six agreements. We are working to continue growing our dealership coverage in this region, and we'll share more progress in our future announcements. We are already seeing our hybrid distribution strategy deliver promising results in the U.S., with sales starting to be generated from our dealers.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We have also seen promising growth in the US market following the launch of VF 8 and its continuous improvements and software updates. We expect further growth in 2024, as the VF 9 will be available for delivery in the US market, starting in late Q2, early Q3, and the VF 7 after that.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Notably, we saw a pickup in consumer interest on the back of attractive lease offers amidst macroeconomic headwinds, confirming our belief in consumers' demand for EV in this market. Our dealers have been receiving positive feedback from US customers. Most were surprised how well-equipped the VF 8 is as the first product from a new EV brand. Customers have particularly praised the smooth acceleration, spacious interior with comfortable fit and well-thought-out layout.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

In addition to the U.S., Canadian, and European markets, we are also exploring dealership partnership with other parts of the world, where the EV revolution is still at early stage, like in South and Southeast Asia. At the same time, capturing the opportunities in new markets such as the Middle East and Africa. As discussed in the last quarter, Asia will remain one of our key strategic markets.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We believe that it represents the future of the automotive and electric vehicle market, driven by demographics and government drive and incentive for EV adoption. Let's take a closer look at our performance in three key markets in Asia. We will start with Thailand. Last month, we announced our official launch in Thailand, one of Southeast Asia's most vibrant electric vehicle markets, with a relatively established charging stations infrastructure out of ASEAN countries.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

To showcase our commitment to sustainable mobility, we unveiled a diverse range of green solutions during the Bangkok International Motor Show, and signed LOI with 15 initial dealers in Thailand. Many of those are already discussing with us regarding optimal showroom locations. At the event, we display right-hand drive versions of six of our models, including the VF 5, VF e34, VF 6, VF 7, VF 8, and VF 9, along with our complete lineup of electric scooters and our electric pickup concept, the VF Wild.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Now, I would like to turn to India. India's rapidly growing market has great potential and is a key component of our global multifaceted expansion strategy. During February, we broke ground on our EV manufacturing facility in the state of Tamil Nadu, and by the middle of March, construction was already underway.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We take a realistic capital allocation approach with the initial CKD phase of 50,000 EVs per year, and would be able to rapidly increase capacity as conditions require. And finally, let's turn to Indonesia. Following our successful debut at the 2024 Indonesia International Motor Show in February, we started opening orders for the VF e34 in Indonesia last month, marking another milestone in our expansion in Southeast Asia.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

With the introduction of this model at a very competitive price, our aim is to support Indonesian consumer as they embark on the journey to a sustainable transportation future. Also, the first dealer store was opened in Greater Jakarta, which will start selling the VF 5, VF e34. During 2024, we plan to expand our EV distribution network across major cities in Indonesia.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

With regards to our expanding product lineup, the much-awaited VF 3 is under development, while on track for launch locally in Vietnam within 2024, and then overseas from 2025 onwards. VF Wild, our highly anticipated pickup truck, is at early stage of study, and we plan to share a target launch soon. Other milestones achieved in the Q1 of 2024 include closing our merger with VinES Energy Solutions. This is an important step in completing VinFast integrated supply chain and will help to build a competitive advantage for us in the global EV market.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We started building our own charging network in Vietnam that is exclusive to VinFast, in addition to working with partners overseas, allowing VinFast access to over 850,000 charge points globally. Our founder recently established an independent charging infrastructure company, V-GREEN, to focus on developing charging stations.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

This will aid VinFast's global expansion, especially in markets where infrastructure is still at an early stage. V-GREEN shall act as a partner of VinFast and will provide charging access to VinFast EVs in many markets, which shall translate into reduction in CapEx for VinFast, helping VinFast stay focused on our EV business' growth.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Looking ahead, we remain committed to executing our strategic priorities to strengthen and grow our business globally. With regards to our product lineup, our focus during 2024 includes, first, delivering the new, highly expected and very affordable VF 3 model in the domestic market. Secondly, delivering the new product, the VF 9, VF 7, in North America. And finally, completing our full EV lineup for global market in both left-hand drive and right-hand drive versions, along with the worldwide launch of all models.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

With regards to our global footprint, we expect to start delivering our EVs in markets with high EV demand growth, including key focus on Indonesia, Thailand, the Philippines, and India this year. Our team in this market are proactively working with dealers to accelerate the readiness of their showrooms. Our distribution partners in other parts of the world are also progressing to the next phase of discussion needed to import EVs and commence local sales.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

In closing, we expect the majority of sales to come in in the second half of the year, with the first half dedicated to setting up the foundation, including production ramp-up, new product launch, and finalizing dealership agreements. With that, I would like to hand over to Lan Anh, our CFO, to present our financial results for the quarter.

[Lan Anh Nguyen, CFO at VinFast]

Thank you, Madam Thuy, and hello, everyone. First, I'd like to address a housekeeping item. As mentioned in the previous call, following the completed acquisition of VinES in January, a significant step towards completing VinFast's fully increased production chain, we consolidated the two companies' financial statements in the Q1 of 2024, and restated the full year 2023, incorporating VinES financials for comparison purposes.

[Lan Anh Nguyen, CFO at VinFast]

The impact on the financial statement in the Q1 of 2024 include a $4.7 million increase in R&D, and a $11.3 million increase in depreciation expense. We kicked off 2024 with $302.6 million in revenues for the Q1.

[Lan Anh Nguyen, CFO at VinFast]

As a lowest season in the domestic market, this is a decline of 31% compared to the previous quarter, but an improvement on a year-over-year basis, with revenue up by 269.7%. I'd like to remind you all that Q1 2023 recorded only about 6.8% of our full year's revenue, or only 5% of our 2023's total delivery. Our Q1 in 2024 was in line with our internal forecast on the expectation of increasing brand awareness and acceptance, positive impacts of our active sales and marketing campaigns, and the early contribution of our expanded dealership network.

[Lan Anh Nguyen, CFO at VinFast]

Our gross loss in the Q1 of 2024 was $150.8 million, equivalent to a gross margin of -49.8%, as compared to -172.9% in the Q1 of 2023, and -43% in the Q4 of 2023. The improvements of gross margin over the Q1 of 2023 was attributed to increased sales and improved costs.

[Lan Anh Nguyen, CFO at VinFast]

As Q1 sales was low seasonally, gross profit margin declined compared to the Q4 last year, mostly due to depreciation. Our Bill of Materials has showed constant progress and will be one of the key drivers for lower cost and profitability. On the operational front, we have made strides in improving our profitability.

[Lan Anh Nguyen, CFO at VinFast]

Our operating loss in the Q1 of 2024 was $421.8 million, representing a decrease of 7.8% from the Q1 of 2023, and a decrease of 15.4% from the Q4 of 2023. This was largely due to the decline in our R&D expenses, the majority of which were front-loaded by design in the early years of our product development.

[Lan Anh Nguyen, CFO at VinFast]

With increasing product readiness, expanding dealership network, and growth brand awareness, we expect our operating margins to improve in the future. Turning to our liquidity position, as of 31 March 2024, we have not utilized our reserve of $1.8 billion, including cash on hand, reserves in grants from founder, and our ELOC facility.

[Lan Anh Nguyen, CFO at VinFast]

This can continue to support our cash needs for operations and mandatory CapEx needed underlying our growth plan this year. We expect a lump sum CapEx between $1 billion and $1.5 billion in 2024, majority of which is to fund the constructions of VinFast manufacturing facilities in the U.S., India, and Indonesia. We plan to fund this using our liquidity reserve, as mentioned above, and if needed, from the new funding resources, combining equity and equity link.

[Lan Anh Nguyen, CFO at VinFast]

We committed to our manufacturing expansion plans, but also understand the ability to achieve our top line target of 2024 independently as our Vietnam's product brand and growing global distribution network can support such growth. Our debt service is prepared using refinanced or extended facilities that have been agreed in principle with our partners, besides being supported by our self-generated cash flows.

[Lan Anh Nguyen, CFO at VinFast]

In summary, our financial performance in the Q1 of 2024 is in line with our internal forecast. We continue to accelerate the foundational work to meet our 2024 targets in the next quarters. The executive team have a very flexible and adaptive mindset to address real market conditions quickly. As Madam Thuy has mentioned earlier, we are very excited about our second half and the longer term outlook of VinFast. With that, I will turn back to Madam Thuy for closing remarks.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thank you, Lan Anh. Finally, I would like to conclude reaffirming our target of 100,000 deliveries of 2024. We stay focused on launching new products and entering new markets to support this target. Cost control is a priority for us, and we have shown progress quarter-over-quarter since last year and continued to be our daily to-do item, including BOM cost, production cost, general operational cost, and always screening and opting for the most cost-effective option available. We maintain our target of breakeven by the end of 2025. I would like to hand over to the operator for the Q&A section.

[Operator]

Thank you. As a reminder, to ask your question, you'll need to press star one, one on your telephone. To withdraw your question, please press star one, one again. Please wait for your name to be announced. We ask that you please limit, limit your questions to two only. Please stand by while we compile the Q&A roster. One moment for our first question.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, operator. We already have the first two questions from Tu Thanh, Viet Capital Securities. The first question is:

[Company Representative at VCBF]

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

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thank you. We maintain our guidance of 100,000 EVs in 2024. Lower priced products to be added in the coming quarters, targeting a broader customer base, combined with a growing dealership network and expansion to new markets, will make our EV much more accessible to customers and help accelerate VinFast growth and drive our sales growth in second half of the year. As Lan Anh already mentioned earlier, so the Q1 performance is in line with our internal forecast, reflecting a low season for Vietnam and delivery based on the existing models, mostly.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Overall, the first half of 2024 is the time where we focus on the foundation for growth in the second half, including signing with dealers in the U.S. and globally, accelerating the opening of new showrooms with them, and at the same time continuing to complete the development of products and different variances to be added to the market.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. We have the second question:

[Company Representative at VCBF]

How many of your deliveries in Q1 came from GSM?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thank you. Vietnam remains the key markets in Q1, and products for the market overseas are underway to be sold and delivered in the coming quarters. And for GSM, GSM in Q1 is about 52% of total deliveries, so less than last year.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Ms. Anh Nguyen. We have the next question from John Murphy, Bank of America.

[John Murphy, Research Analyst and Managing Director at Bank of America]

Can you disclose the profit from e-scooters versus EV? Maybe even just directionally.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

So e-scooter have been in the market longer than EVs, and so we have time to optimize on them. The profit on EV taking a little bit more time. E-scooter is getting there in terms of like a breakeven. So, yeah.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. The second question is:

[John Murphy, Research Analyst and Managing Director at Bank of America]

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

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We remain to target gross profit margin breakeven by 2025. Some models might return profit earlier than others because they've been on the market for longer. But overall, 2025 is still the target for the whole portfolio.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Pricing pressure. We are assessing, and we continue to study the impact of the market conditions. We adopt, as you can see, a very flexible approach in our go-to-market execution, to make sure that it fits the market conditions that we enter. We are able to do so thanks to the wide range of products, especially those at a very affordable price point. We are very diversified in our market target, which give us room to be creative as well.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

The ultimate and the most important goal for us is to achieve our target and make sure that our offering is competitive, and we take care of the total cost ownership throughout the life cycle for the customer. Basically, giving them high value for the purchase.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. The third question from John is:

[John Murphy, Research Analyst and Managing Director at Bank of America]

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

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Yeah, we continuously evaluate our entry into each of the markets. As you can see, we are focused on a few markets; few of the markets are actually important to us, and we focus our resources on those markets. However, we have the opportunity to play on a global field, thanks to our unique benefit from the trade agreements with many countries, and we are not restricted by geopolitical constraints. So we would like to roll out to multiple markets where we can. Yeah, but you will see that certain markets are important to us, and we focus more resources on those markets. Thanks.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. We have the next question from Tu Thanh.

[Analyst]

What is your refinancing plan for the domestic bond worth VND 11.5 trillion that will mature in December 2024?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

This is a tech combined bond, which is already in the refinancing plan, agreed with our partner.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Ms. Phan Nguyen. We have the next question from Tu Thanh.

[Analyst]

Why did the loss in Q1 2024 gross margin widen versus Q4 2023?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

For the loss in Q1 2024, the gross margin in 2024 Q1 widened versus Q4 2023 due to the low season, seasonal sales. Gross profit margin was higher compared to the Q4, mostly due to the depreciation allocated to the low volume. In fact, our bill of materials has shown a constant progress and will be one of the key drivers for a lower cost and thus profitability, as mentioned.

[Operator]

Dan Ives from Wedbush, your line is now open. Please ask your question.

[Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities]

Yeah, thanks. Can you talk about how important is Indonesia on the growth plan, you know, especially this year?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Dan. Nice to hear your voice. Indonesia is one of the key important markets for us. It's a large market, over 130, sorry, 350 million people. Third most populous country in the world, very low EV penetration. We start out in the market on the same footing as with other people. It's very, very, very important market. And it's part of ASEAN as well, and we've been focusing on this market from the beginning of the year.

[Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities]

Great. And then just a follow-up. Madam Thuy, like, when you think-When you think about the 100K for the year, you know, and here it is, you know, we're sitting in April. I mean, does it feel like everything is sort of tracking, you know, relative to expect? And maybe you think about where we were even three, four months ago. Can you just talk about that just from a trajectory perspective, you know, in terms of, as much as you could talk about it?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Sure. Q1 is lastly checked our internal plan for the year. We also we're confident about the guidance of 100,000 vehicles. As I mentioned from the last earnings call, the most of the deliveries will happened in the second year. We still rely a lot on the domestic market. However, we also started expanding into international markets, and as the products are available for international markets and dealership agreements are signed, the showrooms are open, markets enter, we will start seeing more volume coming in as well.

[Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities]

Great.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We're still confident about the numbers.

[Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities]

Okay. Awesome. Thanks.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thank you. Thanks.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Brian Dobson with Chardan Capital Markets. Your line is now open.

[Brian Dobson, Managing Director at Chardan Capital Markets]

Hi, good morning. Thanks very much for taking my call. I guess first, you provided some good color on the expansion of your hybrid dealership network in the United States. Do you think you could 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?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Sure. We signed 10 more dealership agreements in Q1 with the addition of the six agreement that we already announced. So we have 16 dealership agreements signed in the U.S. We are still evaluating, I think, 82 different applications for about close to 150 locations in the U.S. Very robust pipeline of showrooms for our consideration in the U.S. The feedback that we receive is pretty positive. As you could see that, you know, two of the dealership points already open and started selling in Q1.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

The feedback from the customers good about the products. We also receive a lot of constructive feedback from the dealers as well, in order to improve our own service and products offerings but so far, the dealers are very excited, and very cooperative and happy with us.

[Brian Dobson, Managing Director at Chardan Capital Markets]

Thank you for that color. You know, as you're thinking about sales through the balance of the year, you know, there have been many recent reports that have pointed to weaker near-term electric vehicle demand and rising production of hybrid vehicles. Do you think that that's a very U.S. and European-focused viewpoint? And furthermore, do you believe that, you know, potential relative softer demand in the near term in those markets could be offset by potential sales in Asia and the rest of the world, other markets that you're selling into?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Yeah, we believe that the sales for EV is still growing. Maybe it's not growing as fast as the growth, you know, as fast growth rate as before, but it's still growing, and that, you know, clearly shown in the statistics for all the regions, even in the US and European markets. Actually, you brought up a very interesting point, that maybe it's different between US and European and other markets.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Because I think in US and European more developed markets, we will start having to, after the initial adoption, then you have to start dealing with adopting the mass market, right? The people that use the EVs for their daily use, versus in the more nascent markets like Indonesia, like India, like, you know, ASEAN for us, where EV adoption is still very low, and we will start by, you know, enabling the adoption with various strategies. Our approaches to, you know, more developed markets versus nascent markets are slightly different as well, and the potential are also different in those markets.

[Brian Dobson, Managing Director at Chardan Capital Markets]

Yeah, thanks. I think that's an important point, to distinguish there. Then, I guess, just thinking about the balance of the year, I suppose EV sales were roughly, you know, sub 10% in the Q1, which was pretty close to our expectations. As you're thinking about sales cadence in 2Q, 3Q, and 4Q, I suppose right now, do you think that the lion's share of sales will be coming in the back half of the year? And can you give us any additional color on cadence?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

As we, if you look at some major, I mean, Vietnam will continue growing as we adding more vehicles, right? So VF 7 just started we—especially, when the VF 3 come in, toward the end of the year, we start seeing, more volume from, from the affordable models. Because you, in, in Q1, you could see that about half of our sales from, from the VF 5 and people are very excited about the, the upcoming more affordable, model VF 3.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Vietnam will continue growing the other, markets, in around us, we, as we start delivering, in end of Q2, early Q3, and then in Q4, you start seeing the volumes in those markets as well. In the U.S. and North America in general, as we add more and more dealers, dealership points to our mix, and as they start selling in the whole North America, you will also start seeing more volume coming in. We are still confident about the guidance of 100,000 vehicles per year for this year. But most of it will start coming in more in Q3 and Q4 this year.

[Brian Dobson, Managing Director at Chardan Capital Markets]

Excellent. That's very encouraging. Thanks so much.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thanks. Thanks a lot, Brian.

[Operator]

Thank you. One moment for our next question, please. Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is now open.

[Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald]

Hi, good morning, everyone, or good evening, and congratulations on the quarter, and thanks for taking our questions. You know, I think a lot of our questions have been asked by now, but maybe just following up on Brian's questions.

[Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald]

Similarly, you know, how should we think about gross margins throughout this year and maybe early into next year? You know, understanding that the higher volume vehicle deliveries will come in the second half, so presumably, that's when we'll see the big improvement in margins. But just curious if you could perhaps give us some color on how should we think about margins for next quarter and maybe for the second half of this year. Thank you.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Hi, Andres. As I mentioned in the last earnings call, and it's, we are tracking similarly to previously, where we believe that we should be getting close to the gross margin break-even for the whole portfolio by the end of this year, early next year. Different products are different. The products that are more mature, like, we have E34, VF5 in Vietnam, for example. We're getting there faster, and the newer products in newer markets with smaller volume will get there a little bit slower. But as a whole portfolio, we're heading into a gross profit margin positive early next year. That's the plan.

[Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald]

Got it. Thanks, Thủy Le. That's helpful. Maybe to follow up there, how should we think about liquidity and, you know, potential capital raising opportunities throughout the year? I'm wondering, you know, how you're thinking about that still and any color there that you can provide. Thank you.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

As Lan Anh mentioned before, we still have the same pool of liquidity that we had at the beginning of the year. We haven't tapped into it yet. You know, the cash, the cash grant from our shareholders, the ELOC, they're all still intact. We've been, you know, continuing the operations. We have multiple fundraising in the pipeline as well, for various projects.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

As they materialize, we will be able to discuss more. But we also plan our investment, our spending accordingly as well. Otherwise, you know, we still have the liquidity reserve, we still have our operations, and we're pushing according to the plan.

[Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald]

Got it. That's very helpful. Thank you. Maybe just one last one, if I could. Just wondering, any updates on the North Carolina facility, and is that still on track for middle of next year? Thank you.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

North Carolina is still ongoing. We're still on track to start the operation by the end of, like, end of next year, start hiring lots of workers and putting in operations by the end of next year. But probably the full operation, perhaps, will take a couple of months.

[Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald]

Wonderful. Great. Thank you so much. I'll pass it on. Thanks again. Bye-bye.

[Operator]

Thank you. One moment for our next question... Our next question comes from the line of Tyler DiMatteo with BTIG. Your line is now open.

[Tyler DiMatteo, VP and Digital Media and Live Entertainment Analyst at VCBF]

Good morning, everyone. Thanks for taking the questions here. I wanted to just talk a little bit about India here, and the recent news from the government trying to incentivize EVs and a lot of global auto OEMs potentially looking to enter the market. I mean, 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's ongoing at the facility today? Just any broad strokes on that? Thank you.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Thanks, Tyler. We also benefit similarly from the EV policy in India with our factory. We also get the significant, you know, we get the benefit before we-- tax benefit before we open the factory, as well as, you know, the incentive from the government for investing in India. The factory is, we clear the land. I was there last week. We cleared the land. We started the construction. It's so we implement a very kind of frugal CapEx plan with that factory. We're building... What we're building is 50,000 CKD factory. Simple effective to start with.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We can scale it up as and when needed. But right now, the total investment is not major. There's a lot of benefits coming from the government as well for building the EV factory in India. We see a lot of benefits out of that and also India market since you brought it up, it's a very important market for us. However, the consumers are quite price sensitive and sensitive to the warranties and other the service of the company.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

We believe that our wide range of products and our warranty our our market the industry-leading warranty will help further comfort the consumer in India. Huge market again, and we have a lot of confidence in the market.

[Tyler DiMatteo, VP and Digital Media and Live Entertainment Analyst at VCBF]

Okay, great. Then in terms of the margin breakeven target, I'm curious, you know, how much of the incremental benefit of reaching that target do you expect to kind of just come from overall fixed cost absorption as you scale up the factory, versus benefits of component sourcing and bill of materials? Just curious how you're thinking about squeezing out some incremental efficiencies there as you look to roll out the different products here and increase presence in the market?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Within the last year and a half, when we started building the vehicles in our factory here in Vietnam, but as you know, at the beginning, it always, there's a lot more wastage. We have a lot more fine-tuning to do. We did a lot in terms of optimizing the production in the past year and a half already, and we achieved a lot of optimization from the production cost per unit. However, as we ramp up the volume, then a lot of the fixed costs can be spread over the higher volume, and then as a result of that, unit cost will be lower. We expect that this year as well.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

However, most of the savings, most of the optimization, we well, we believe will come from the optimization of the Bill of Materials and all the initiatives, like hundreds of initiatives that we are taking this year in order to bring down the BOM cost. There are other cost optimization initiatives as well, for like operational costs in general, but we think that the BOM cost optimization and the volume scale will bring the most savings for us per unit.

[Tyler DiMatteo, VP and Digital Media and Live Entertainment Analyst at VCBF]

Okay, great. Thank you. Really appreciate the time. I'll turn it back to the queue.

[Operator]

Thank you. I'm currently showing no further questions on the phone lines. I'd like to turn the call back over to Nhi Nguyen for closing remarks.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, operator. We have the next question from Hien Phan:

[Analyst]

How is your negotiation with PV Oil to establish charging points in the gas station?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

With the PV Oil, VinFast maintain a cooperation with PV Oil to set up charging station throughout PV Oil gas station. Then both parties can share mutual revenue sharing.

[Nhi Nguyen, Investor Relations Manager at VinFast]

... Thank you, Miss Anh Nguyen. We have the next question from Tan Le, VCBF.

[Company Representative at VCBF]

Please share your criteria to choose to cooperate with a dealership, and what are the typical terms in the cooperation between VF and a dealership?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

Let me talk about the terms first i think our terms for, we have basically it's the same terms for dealership in different like different markets we have different set of terms. Like, for example, in Vietnam markets, in US market, Canada, Europe, and the Middle East, for example. We have basically similar terms for those dealers, because each of the markets have different, you know, like, have specific characteristics to them.

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

In each of the markets, we take applications from the dealers, and we evaluate various criteria for the dealers, starting from, you know, their performance, their history with other brands, their financial situation, their- Especially the locations and the showroom that they want to open with us. We get to know the dealers intimately to see, because it's a long-term partnership, so we need to get to know our partners. It's a very detailed process in order to get to know the dealers before we sign the dealership agreement with them.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. We have another question from Mike Novak:

[Analyst]

Can you confirm details of the VF 7 launch in North America, such as starting price, first delivery date?

[Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast]

The current plan is to start delivering VF 7 in the US in Q3 or Q4 this year. We will announce the starting price later, right before the launch of the market.

[Nhi Nguyen, Investor Relations Manager at VinFast]

Thank you, Madam Thuy. We have now concluded the Q&A session. Thank you everyone again for joining us today. Should you need any clarification, please let us know by sending an email to ir@vinfastauto.com. We look forward to speaking with you again soon. Take care and goodbye.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

Participants

Analysts

• Andres Juan Sheppard Slinger, Managing Director and Senior Equity Research Analyst at Cantor Fitzgerald
• Brian Dobson, Managing Director at Chardan Capital Markets
• Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities
• John Murphy, Research Analyst and Managing Director at Bank of America
• Lan Anh Nguyen, CFO at VinFast
• Lê Thị Thu Thủy Le, Chairwoman of the Board at VinFast
• Nhi Nguyen, Investor Relations Manager at VinFast
• Tyler DiMatteo, VP and Digital Media and Live Entertainment Analyst at VCBF
• Analyst
• Analyst
• Analyst
• Company Representative at VCBF