VinFast Auto Ltd. Q2 FY2024 earnings call

• VinFast is committed to a sustainable future as a vertically integrated green mobility solutions company providing high-quality electric vehicles.
• In Q2, 13,172 EVs were delivered, up 44% QoQ and 43% YoY, with first half total deliveries at 22,348 (101% YoY growth). E-scooters delivered 13,076 units in Q2, up 67% QoQ and 28% YoY.
• Vietnam was the main driver of Q2 growth, with VF 5 being the main volume driver, and VF 3 having 28,000 non-refundable pre-orders within 66 hours of launch. VinFast has the majority market share of EVs in Vietnam.
• In North America, the timing of the North Carolina plant was pushed out due to macroeconomic uncertainties, with plans to launch VF 9, VF 6, and VF 7 in the US by year-end.
• Expanded into Southeast Asia and India, with 15 showrooms established in Indonesia by August 31st, and the Tamil Nadu plant in India on track to commence operation in 2025.
• Cost optimization efforts saw average bill of material cost decline 16% and production cost decline 43% in Q2. Operating expenses rose due to expansion into international markets, but SG&A expense as a percentage of revenue improved with dealer network sales.
• Liquidity as of June 30, 2024, was US$98 million, with unutilized grants and e-log facilities to support operations.

In Q2 2024, VinFast delivered 13,172 EVs, which was a 44% quarter-over-quarter increase and 43% year-over-year increase. The first half of 2024 saw total deliveries of 22,348 vehicles, representing a 101% year-over-year growth. E-scooters delivered 13,076 units in Q2, up 67% quarter-over-quarter and 28% year-over-year. Q2 2024 revenue was US$357 million, a 9% year-over-year increase and 33% quarter-over-quarter increase. The reported gross loss for Q2 2024 was US$224 million, equivalent to a gross margin of minus 62.7%. Average bill of material cost for own models declined by 16% and average production cost for own models declined by 43% in Q2.

• Target to deliver 80,000 EVs in 2024, with momentum in Vietnam expected to be the main driver. VF 3 delivery starts in Q3 2024.
• Gross margin is trending more positive than the previous quarter, with expectations of margin improvement in coming quarters. Aim for positive gross margin by next year and positive EBITDA margin by 2026.
• The 80,000 delivery target for 2024 is attainable through production ramp-up in Vietnam and growing distribution network.

• Macroeconomic uncertainties affecting EV outlook in some markets.
• Competition in the EV market, including new players entering Vietnam.
• Impact of events like Typhoon Yagi on the Haiphong factory, though operations resumed quickly.
• Evolution of charging infrastructure landscape and its challenges and opportunities for VinFast.

Q: How has the competitive landscape in Vietnam changed with new players entering?

A: The Vietnam EV market has room to grow, and new players can quicken EV adoption, but VinFast's dominant green mobility ecosystem, including V-Green charging infrastructure, and brand loyalty to Vingroup should help maintain its leading position.

Q: Can you provide more color on bill of material and production cost reduction for the second half of 2024?

A: Initiatives included lower battery costs, design optimization around ADAS, customer fit upgrades, and supply chain optimization. These cost savings will be visible in P&L as vehicles made with these materials are delivered, and optimization is expected to continue.

Q: What is the gross margins trajectory and path to breakeven for later this year?

A: Excluding one-off NRV charges, margins are trending positive. Margin is expected to improve in coming quarters, with aim for positive gross margin by next year and positive EBITDA margin by 2026.

Q: What is the total liquidity including e-log facilities and grants?

A: As of Q2, cash on hand is US$98 million, with unutilized e-log facilities and grants, totaling around US$1 billion when considering e-log and grants.

Q: What is the product mix expectation going forward, especially with variance in ASPs?

A: VF 3 and VF 5 will be key revenue drivers, with more affordable models contributing to the 80,000 delivery target for 2024.

Q: How is marketing being used to boost brand awareness globally?

A: In Vietnam, brand awareness is high due to Vingroup's ecosystem, so less marketing spend is needed. In new markets like the US, more spend is on brand awareness, relying on dealers and dealership network expansion to spread the word.

Q: What's underpinning improving EV sentiment in Vietnam?

A: Low vehicle penetration in Vietnam, affordable EV models, and green initiatives contribute to improving sentiment. VinFast's comprehensive product portfolio and innovative battery leasing program also play a role.

Q: Impact of Typhoon Yagi on Haiphong factory?

A: Typhoon Yagi caused damages to surrounding infrastructure, but operations resumed within a few days after assessment.

Q: Funding progress for CapEx and construction of India and Indonesia facilities?

A: Pushing out the North Carolina plant start released capital for investment in Indonesia and India plants, with CapEx in Q2 focused on upgrading Vietnam factory and savings from not investing in North Carolina plant being used for these facilities.

Q: Impact of PV power plants building charging stations on VinFast's competitive advantage?

A: Vingroup's charging infrastructure expansion benefits all EV brands, but VinFast's existing extensive charging network and continued investment in charging stations maintain its competitive advantage in Vietnam.

Q: Update on capital expenditure outlook and international expansion strategy post-North Carolina plant delay?

A: CapEx outlook is disciplined, with savings from North Carolina plant delay reallocated to Indonesia and India facilities. International expansion focuses on selected markets instead of further expansion for now.

Q: Customer reception and charging infrastructure in Southeast Asia for VinFast?

A: VinFast's affordable models, innovative battery leasing program, and above-market warranty in Southeast Asia are well-received. Charging infrastructure is being developed in ASEAN, including public charging networks.

Q: Still targeting 80,000 deliveries in 2024?

A: Yes, committed to 80,000 deliveries, with VF 3 expected to contribute significantly, including 20,000 deliveries in Vietnam market alone.

Q: Asia market contribution to long-term outlook?

A: Asia is important, with large markets like India and Indonesia offering significant potential. Asia is expected to account for a substantial portion of global volume in the longer term, possibly 30-50%.