VinFast Auto (VFS -1.77%) has always been an intriguing company. It's a Vietnamese automaker that dominates its home market in electric vehicles (EVs) but has ambitious plans to expand into the valuable U.S. and European markets. The company just released its fourth-quarter earnings and it had impressive growth, but also wider losses.
With the stock down 20% year to date, is now the time to buy VinFast?
VinFast managed to post impressive growth in vehicle sales. EV deliveries checked in at 53,139 during the fourth quarter, a substantial 143% higher than the prior year. It wasn't a one-quarter wonder, either, as full-year deliveries were up 192% from 2023, up to 97,399 units.
That delivery growth drove vehicle sales to $634.5 million in the fourth quarter, a 77.8% increase from the prior year. On the downside, the company's gross loss and gross margins suffered. VinFast posted a gross loss of $536.4 million during the fourth quarter, representing a 176% increase from the prior year and a staggering 341.3% increase from the third quarter of 2024.
One of the critical components for VinFast to thrive as a company will be expanding in the U.S. and European markets. VinFast recently made a couple of intriguing moves, including shutting down all of its direct-to-consumer showrooms in California. The automaker will now rely entirely on its growing dealership franchise network, which has 38 operational and soon-to-be-operational dealers in 16 states, including California which remains a key market for EVs.
Perhaps more problematic for the Vietnam automaker are recent tariffs on imported vehicles that are expected to expand to imported vehicle parts next month, as the company imports the VF 8 and VF 9. Only making matters worse was the company's decision to suspend plans to build a U.S. factory last May.
Already the company is facing challenges expanding in the U.S. as a relatively unknown brand. VinFast had only 367 registrations during the first two months of the year, according to data from S&P Global Mobility. That was an 18% decline compared to the same period last year.
The company's strategy is similar in Europe, with a recent launch of the VF 6 to complement the VF 8. As of March 31, VinFast has 12 self-operated showrooms and two dealer stores in Europe, so it has an uphill battle for expansion with such a small footprint.
The 20% decline in share price might be enough to entice some investors, but there's massive risk in investing in this Vietnamese automaker. It's still largely unproven outside of its home market, and importing vehicles in key markets such as the U.S. just got more expensive and complicated. It also comes at a time when the company is already struggling to gain traction without the potential for price increases due to tariffs.
If VinFast can truly break into the U.S. and European markets and become a known EV brand, it will certainly reward investors. But that's a big if, and so far VinFast hasn't proven itself enough to be a buy now.
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