What’s behind VinFast’s investment ambitions in India?

What’s behind VinFast’s investment ambitions in India?

Indian-born RMIT Senior Lecturer Dr Majo George hailed VinFast’s decision to open a manufacturing plant in India as a strategic manoeuvre that not only leverages the potential of a burgeoning electric vehicle (EV) market but also positions the company favourably against future competitors.

On 25 February 2024, Vietnam's leading EV manufacturer VinFast officially broke ground on its first integrated EV manufacturing facility in the state of Tamil Nadu, India.

This move into the Indian market is a significant stride in VinFast’s global expansion, reflecting its ambition to penetrate the world's third-largest vehicle market. The initiative involves a substantial investment of up to US$2 billion, with an intended commitment of US$500 million earmarked for the project's first five years. The integrated EV manufacturing facility is expected to become operational in 2026​​​​.

A VinFast VF9 car on display Vietnamese automaker VinFast is opening a manufacturing plant in India. (Image: miro - stock.adobe.com)

The state of Tamil Nadu is already a significant hub for automobile manufacturing and home to the production facilities of global giants such as BMW, Hyundai, and Renault-Nissan. The Thoothukudi site in Tamil Nadu, chosen by VinFast, is expected to evolve into a first-class EV production hub, with an anticipated annual capacity of up to 150,000 units​​​​.

The Tamil Nadu plant will serve as VinFast's third manufacturing project and is noted as the most significant investment in Tamil Nadu's history. In addition to the manufacturing facility, VinFast plans to establish a nationwide dealership network in India to establish a strong brand presence and connect swiftly with customers nationwide​​.

This initiative is a significant step towards promoting green transportation in India. It aligns with the Indian government's ambitious target of achieving 30% electrification by 2030. The Tamil Nadu government has pledged support to this project by committing to provide cleared land, uninterrupted power supply, and other infrastructure support. Furthermore, the project is expected to generate around 3,500 jobs locally, thus contributing significantly to the local economy.

This venture offers VinFast an unparalleled opportunity to leverage India's generous government policies, positioning the nation as a pivotal hub for exporting cars globally. India's robust infrastructure, stable government policies at both central and state levels, a skilled and youthful workforce, and a vast domestic market make it an ideal location for VinFast's ambitious expansion.​​​​​​

The Indian EV market is projected to reach a remarkable $100 billion, making it a lucrative opportunity for global players. However, it is still in its nascent stages of development and offers a unique opportunity for early movers like VinFast to establish brand presence and loyalty.

VinFast's foray into the Indian market comes at a pivotal moment, strategically preceding the anticipated entry of EV giant Tesla into the Indian manufacturing industry. This timing is advantageous for VinFast, as establishing a foothold before Tesla could provide a significant competitive edge.

Given the Indian government's commitment to transitioning to EVs, the local sales of VinFast cars in India could potentially surpass their sales in Vietnam, provided the company effectively markets its cars to the Indian consumer base​​​​​​​​​​.

With the aggressive pricing and futuristic styling, of its EVs, VinFast has the potential to capture a significant share of the Indian EV market. This could catalyse the company's growth in the wake of fluctuating market dynamics in the United States​​​​​​​​​​.

Dr Majo George posing with crossed arms Dr Majo George, Senior Lecturer, Logistics and Supply Chain Management, The Business School, RMIT University Vietnam

The connection between Vietnam and India dates back centuries and further enhances the potential for VinFast in the Indian market. As Vietnam has become a popular tourist destination, many people in India are already familiar with VinFast and its vehicles. The cultural similarities between the two nations, reflected in a shared preference for SUVs, sedans, and other electric ones, including two- and three-wheelers, present a unique advantage for VinFast.

Moreover, there is a substantial opportunity for VinFast to venture into the development of electric batteries, catering not just to the Indian market but also to the global EV market. Additionally, exploring the Indian taxi car market under VinFast GSM could be another lucrative avenue, tapping into a vast and growing sector​​​​​​​​​​.

VinFast should also focus on two new sectors: heavy and transport vehicles. The company's existing prowess in manufacturing electric buses aligns perfectly with the current trend of Indian state governments transitioning their traditional bus fleets to electric models. The heavy transportation industry, especially the production of electric trucks, is another area ripe for exploration. With state-of-the-art technology and the visionary leadership of Mr Pham Nhat Vuong, VinFast is well-positioned to conduct further research and potentially dominate this segment. The relaxed policies in India provide an inviting environment for such innovative ventures​​​​​​​​​​.

Overall, VinFast's expansion into India represents a strategic move to tap into one of the world's most populous nations and rapidly expanding EV markets. It signifies the company's commitment to sustainable development and a vision of a zero-emission transportation future, bringing economic benefits and contributing to the region's green energy transition.

Story: Dr Majo George, Senior Lecturer, Logistics and Supply Chain Management, The Business School, RMIT University Vietnam

Masthead image: Gorodenkoff - stock.adobe.com | Thumbnail image: miro - stock.adobe.com

  • Logistics

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