VinFast to build German plant as it enters Europe’s automotive market

31 January 2022

VinFast, part of Vietnam’s VinGroup, has confirmed it is looking for a location in Germany to build electrically-chargeable vehicles (EVs). This would mark a major commitment for the carmaker as it joins a throng of new OEMs hoping to secure a place in Europe’s changing automotive landscape.

Electromobility and digitisation are transforming what was an established sector, creating opportunities where once there were only well-recognised brands. But how many of these fresh-faced firms will find a permanent home in one of the world’s largest automotive markets?

Local-to-market production

VinFast confirmed it is working with economic-promotion agency, German trade and Invest (GTAI), to find a location in Germany to build EVs. Le Thi Thu Thuy, Vingroup vice-chair and VinFast global CEO, explained that Europe is one of the most important markets for the company. So, setting up a manufacturing site in the region’s largest economy would effectively mark the brand’s arrival.

‘We congratulate VinFast on its decision to come to Europe’s largest economy and the automotive heartland of the continent,’ said GTAI CEO Robert Hermann. ‘Mobility is changing dramatically in Germany and is expected to do so even more under the new government. We are delighted to assist VinFast in finding its ideal location and setting up shop in Germany.’

The carmaker plans to go fully electric by the end of the year, launching a line-up covering the A, B, C, D, and E segments. This means additional production capacity will be not just useful but necessary. Ensuring manufacturing like this can take place locally is a rapidly increasing trend amongst OEMs. With the pandemic and semiconductor shortages proving the fragility of international supply lines, it makes increasing sense to build cars as close as possible to their intended markets.

‘The era of shipping cars around the world is over, especially since COVID-19. You must have the factory close to the market in order to win over your customers. VinFast wants to provide high-quality EVs and a unique customer experience at reasonable prices. We are confident that we will find a place in the European market as the transition toward EVs in Europe is crystal clear,’ said Thuy.

VinFast is planning to develop a comprehensive production plan for present and future markets. It currently operates out of Hai Phong in Vietnam, with an EV battery-pack plant under construction in the Vung Ang Economic Zone of Ha Tinh Province. Designed to produce 100,000 packs a year, an expected expansion will take its capacity up to one million and allow it to build complete cells. Further announcements are expected, with the company planning an EV-manufacturing site in the US in the latter half of 2024.

Goodbye to central thinking

‘Along with VinFast, we see so many new brands entering the European market at the moment, and it will be interesting to see, which ones manage to not only get a foot in the door but win market shares and manifest their position,’ said Sonja Nehls, principal analyst, Launch Intelligence, Autovista24. ‘I cannot imagine all of those brands still being around in five years from now, but there is definitely room for some.’

In a previous piece for Autovista24, Nehls explained that between 2017 and 2018, less than 5% of all model launches came from new brands. This is expected to rise to roughly a quarter this year. But to ensure success, newcomers will need a clear and unique selling point (USP). The most promising potential aspects are cost performance, technology, concept, as well as brand and user experience. If companies like VinFast can harness a powerful differentiating USP, they stand a chance of cementing a global future.

‘In the end, we should above all say goodbye to our central European or German-centric thinking,’ said Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group). ‘Whether an automotive company will be successful has long since ceased to depend on the German market, and it may well happen that VinFast will simmer on a low flame in Germany  while they grow and prosper in the rest of the world.’