Shares of VinFast Auto (NASDAQ:VFS) are continuing their descent for the second consecutive day, ending down 34% on August 17. It seems like the electric vehicle (EV) maker’s fairytale story is coming to an end. VFS stock jumped over 68% in its stock market debut, pumping its equity valuation to nearly $85 billion. As a result, this valuation exceeded that of legacy automakers General Motors (NYSE:GM) and Ford Motor Company (NYSE:F) as of the close of August 15, 2023.
However, following yesterday’s descent, VinFast’s valuation stands at $46 billion, falling behind Ford’s valuation of $47.4 billion. However, it is still ahead of General Motors’ valuation, which stands at $45.3 billion.
Given the inherent volatility in VinFast’s share price due to its lower share count, there is a possibility that VinFast may lose ground to GM as well.
VinFast’s Auto Troubles are Brewing
VinFast launched its VF8 model in the U.S. this year, and it has sold 740 units in the U.S. until June 30. However, in early May, VinFast had to recall all of the 1,000 units of VF8 that were delivered to the U.S.; 100 of those had already been delivered to customers. A Wall Street Journal report stated that the EV’s display screen would go blank while driving, blinding the driver to warning lights and the speedometer. There were also other minor technical problems with the FV8, all of which VinFast has addressed to date.
VinFast is making tremendous efforts to regain its strength in the U.S. auto market. Notably, the automaker stated that it would repay customers between $100 to $300 for facing quality issues. Plus, it offers a 10-year warranty on the VF8 and the battery.
VinFast also needs additional liquidity if it wants to survive and compete in the auto race. Like any other start-up, VinFast is losing money and needs more funds. VinFast’s promoter, Pham Nhat Vuong, has agreed to pump $1 billion of his own capital into the business next year. Moreover, the parent company, Vingroup, will pump in another $500 million. Further, Vingroup would loan out $1 billion to VinFast’s automotive unit.
The Vietnamese automaker aims to sell up to 50,000 units this year, with only 11,300 units delivered globally in the first half. Moreover, to strengthen its supply chain, the company broke ground at its new EV manufacturing facility in North Carolina, U.S. The plant is expected to initiate production in 2025 with an annual capacity of 150,000 EVs.
Is VinFast a Good Stock to Buy, as per Hedge Funds?
As per TipRanks’ Hedge Fund Trading Activity Tool, VinFast Auto has a Positive confidence signal. During the past three months, four hedge funds have bought 588,500 shares of VFS stock.
