There are a lot of winners and losers in today’s modern EV market. Like, for the past 20 years, investors and governments alike have dumped billions of dollars into their EV programs, with the goal of eventually having them dominate global markets. Unfortunately for them, only a handful of EV brands have ever made a dent globally.
I think as losses mount, and the political tensions between countries grow, companies with EV aspirations are figuring out where exactly to put their money and resources. Today's news proves it.
Welcome back to Critical Materials, the space for the biggest stories in the EV world. Today, VinFast pivots away from the West because of huge, huge losses in the U.S. and Europe. Also, Xiaomi’s YU7 is sold out for the next year, while U.S. used EV sales boomed in July. Let’s hop to it, ok?
30% VinFast Tries Something New: Ignoring Europe and America
If you talk to any EV startup outside of the United States, there’s a common idea that the pinnacle of success is selling outside of its home market, specifically in Europe and the United States. Of course, some of this (especially in China) is to eat up factory overcapacity. Yet a lot of it is because Europeans and Americans typically have more disposable income compared to the rest of the world. Just look a the cars we consider normal here; the idea that a middle-class household can afford two mid-sized crossovers isn’t normal in the rest of the world. To these brands, success in Europe and America would be a ticket to earning real cash.
VinFast certainly tried, but it’s become clear that it’s not really working. The cars the brand sells don’t seem to be up to snuff for European and American markets, while losses have continued to mount. It almost feels as if VinFast is solely continuing onward because of the stubbornness of VinFast’s founder Pham Nhat Vuong, who has put up $2 billion of his own money to help fund the company's ambitions. Recent reporting from Bloomberg shows that the brand is essentially spending $1.57 for every $1 of profit. This meant that VinFast lost a whopping $3.2 billion last year.
But, on the other hand, VinFast has been picking up steam in other Asian markets. This year it opened a production plant in India. It has also grown sales in its home country of Vietnam, and plans to go all-out in other markets like Indonesia. The next step is to cut loses and double down on wins.
From Bloomberg (via Automotive News)
“The opening of its first overseas assembly plant in India earlier this month is a crucial piece in Vuong’s Asia pivot. The factory near Thoothukudi, the Indian port city, will be capable of producing 150,000 vehicles annually for South Asia, the Middle East and Africa. It’s part of $500 million VinFast will spend in its initial India foray — an investment the company expects to eventually grow to $2 billion.
In June, the company inaugurated its second Vietnam plant that initially can produce 200,000 vehicles annually, and it’s months away from a planned opening of a smaller factory in Indonesia.
The new target markets are “late bloomers” in terms of EV sales “but hold tremendous potential and are currently entering a vibrant phase of growth,” the company said.
Now, it’s not clear if it’ll work. In the markets where VinFast wants to expand, Chinese EV manufacturers (with likely superior products) are also entering or are already there. Now, it’s a race against time to get the car brand up and running before Pham Nhat Vuong runs out of money. Because he said he will personally support VinFast until his own coffers run dry.
60% People Are Getting Used EVs While They're Still Cheap
We’ve got a little over 45 days left until the EV tax credit is dead, and it appears that time limit has put a fire under EV shoppers to make a decision. People are flocking to used EVs in droves.
A new Cox Automotive report shows just how much they’ve taken off:
“Cox Automotive has been expecting strong EV sales in Q3, as government incentives approach an Oct.1 sunset. EV sales in July were strong, initially estimated to be the second-best month ever, with sales over 130,000, a 20% year-over-year increase.”
Now, the report does say a lot of this is Tesla doing heavy lifting, as incentives and price reductions of used models have buyers signing on the dotted lines. Pricing incentives are up for all used EV products, but Tesla leads the charge with a whopping 9.4% drop in price compared to last year. That pushes down prices on the used market and, since Tesla is by far the biggest EV brand, the effect tends to ripple across the market.
90% Xiaomi CEO Asks You To Buy A Different Car
When I was in China this past July and drove the Tesla Model Y-sized Xiaomi YU7, it became very clear just how much of a winner it would be for the Chinese market. Like, within five minutes, the car had more than 200,000 lock-in orders, effectively making the thing sold out until 2027.
I can’t even say that this is unexpected or unprecedented, since the SU7 sedan had similar hype. In fact, the waiting list for the SU7 was still so large that Xiaomi let buyers flip their unsatisfied SU7 orders in queue to YU7 crossovers with no penalty. The brand recently completed its expansion of its Beijing-area production facility, but it will take time to get things up and running.
Demand is so strong that Xiaomi CEO Lei Jun jumped back on social media and told folks who are too impatient that it’s totally fine to buy another car from a different brand. Bloomberg reported on this earlier:
“While Lei said last month the company is working hard to increase production capacity and asked people to be patient, he also suggested buyers consider looking elsewhere.
“If you need to buy a car quickly, other China-produced new energy vehicles are pretty good,” he wrote on social media in July. Followers should check out Xpeng’s G7 SUV, Li Auto’s i8 electric minivan or even Tesla’s Model Y, he said.”
Now, is this camaraderie for China’s auto industry? Or is Lei Jun being subtly snarky toward impatient customers and slower-selling brands? The jury is out on that, but we do know that the YU7 is a success.
100% What Happens On October 1st?
I am a serial procrastinator. I’ve been saying that I’m going to buy an EV before the EV tax credit is officially dead, yet I have barely looked.
Now, it's nice to see that Used EVs are so popular, but I think it’s naive to think that they’ll all be gone by September 30th.
So, I can’t help but wonder: what will happen on October 1st? Will these cars just be stuck there, essentially $4,000 more expensive than they should be? I can’t help but feel that I’ll have my pick of the litter at competitive prices on September 29th.
Or, those could be famous last words.
