Category: Automotive

VinFast’s debut at the Paris Motor Show this month has sparked much speculation among Vietnamese customers on the selling price of the two models expected to hit the domestic market next year.

Apart from promising “high-end cars at reasonable prices”, the automaker has not revealed any concrete price range.

Industry analysts say vehicle prices depend on multiple factors such as dimensions, comfort, vehicle safety technology, operation, design as well as production, assembly and localization.

However, these factors will only amount to a base number, as the final price would depend heavily on the brand’s business strategy, they add.

The marketing and sales director for a Japanese automaker believes that reasonable price tags for the sedan and SUV should fall approximately below VND1 billion ($42,800) and VND1.2 billion ($51,300) respectively.

Product position is crucial to any car brand, he explained. The company cannot just simply open with high prices and lower them once it achieves a desired market share. The strategy may seem workable at first glance, but runs the potential risks of previous customers feeling that they have lost something, and therefore, turn their backs on the brand.

He also believed that LUX A2.0 and LUX SA2.0 are not VinFast’s ‘trump cards’. Initially, the manufacturer may accept not to prioritize profits. Attention and acceptance of the brand, especially for new products, would in fact be the most important factors when entering a new market.

The director of a distributor of imported German cars said he also believes reasonable prices should hover around the VND1 billion mark. If the price is set between VND1.4-1.6 billion ($59,900-68,500) as per, the company will be creating obstacles for itself, as VinFast is still very young.

“Even if VinFast is 5 to 10 years ahead of other companies, it would still need just as much time or longer to establish a brand and build customer trust,” he said. “The initial ‘national pride’ and excitement for novel products will inevitably cool down over time.”

Moreover, he said, it would take at several years after the models hit the road to verify their quality and durability, not the mention the fact that technology and equipment for the cars have not yet been finalised.

Bui Sinh, who has held senior positions with several luxury car brands in Vietnam, praised VinFast’s ‘clever’ strategy to start with high-end models. “Once you make a good impression with a mid-range or above product, making small cars will be easy”.

VinFast had not done the opposite, as in reality many automakers specialising in affordable cars faced much difficulties expanding upwards into luxury segments, he added.

However, Bui Sinh reminds that caution must be taken with a low pricing strategy. If the market response does not meet the company’s expectations, the company would be locked into covering losses over the next few years.

On specialist said: “If customers are enthusiastic over a VND1 billion car, selling smaller models at VND300-400 million ($12,800-17,100) will be much easier.”

VinFast, a unit of Vingroup JSC (VIC.HM), Vietnam’s largest business conglomerate, officially showcased its first two vehicles: the LUX A2.0 sedan and the LUX SA2.0 SUV at the Paris Motor Show on Tuesday.

The new carmaker impressed everyone by doing this just one year after kicking off production in northern Hai Phong City. It received much praise for completing design and development of its models, as well as putting together a production line at an astonishing pace.

Supporters pointed to the company’s ‘daring’ strategy of gaining a head start by taking a shortcut, by signing agreements with a strong list of global partners.

The company uses Siemens’ plant construction expertise; BMW’s intellectual property; Pininfarina’s design; and Bosch for hardware, software and service solutions.

Experts say that VinFast’s car falls into the mid-luxury segment. Automobile expert Le Anh believes the sedan can sell for VND1.4 billion ($60,869) and the SUV for VND1.8 billion ($78,260).

However, amidst all the praise and euphoria, many people have advised caution in assessing VinFast’s progress.

An expert with many years of experience in the luxury car sector in Hanoi said: “Initial images and figures do not say much about the product line’s final performance. The commercial version of the models have not even been completed yet.”

“The fact that VinFast could develop the models so quickly is easy to understand given that it has bought most of the required technology, designs and engineering from other carmakers,” the expert said.

This observation matches that of Bill Russo, head of Shanghai-based consultancy Automobility Ltd and a former Chrysler executive.

“The key question is why the world needs yet another car brand in an era when hardware is commoditising. The fact that they have outsourced design and manufacturing and are relying on foreign R&D tells me they are following a traditional path that may not be competitive in an era of digital mobility services,” Russo said.

Meanwhile, a former Vietnamese engineer who has worked for Volkswagen in Germany for many years, said Vietnamese people have the right to be proud at the birth of a new Vietnamese brand.

“But what comes next? Quality, reliability and price are the real problems that VinFast needs to overcome when approaching customers,” he added.

Bui Sinh, who has many years of experience with other luxury car brands, said that there were no grounds to trust the two new models.

“The information provided is one-dimensional, and there is no actual car to verify these claims. Only when we know the car works, should we move on to analyse the quality of the car and the calibre of its technology.”

Sinh also pointed out that if VinFast were to position the first two models in the luxury car market segment, ‘national pride’ would just form part of the brand, and have little effect in the actual selling.  For wealthy customers used to driving luxury or mid-luxury vehicles, patriotism cannot replace actual function, he said.

Other experts have also said people should be careful in assessing VinFast’s progress. Previously, two other automobile makers in Vietnam– state-owned VEAM Motor and private venture Vinaxuki– have flopped.

Bui Ngoc Huyen, chairman of Vinaxuki, which tried to produce a domestic car but ceased production just before its first car was to be officially released in 2012, said VinGroup’s deep pockets would help, but warned that building a brand takes time.

“You have to move from producing small and cheap cars to luxury ones,” he said. “It will take several years for a new carmaker to fine tune its products and win the confidence of consumers. It will take between 10 and 20 years.”