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Vietnamese carmaker VinFast has agreed to build an electric vehicle plant in southern India’s Tamil Nadu state in an investment worth up to $2bn, marking its foray into the world’s third-largest car market.
The EV producer, founded and run by Vietnam’s richest man Pham Nhat Vuong, said it intended to commit $500mn in the first phase of the project and would begin building the plant in Thoothukudi in the southern part of Tamil Nadu this year.
VinFast and the Tamil Nadu government signed the memorandum of understanding at an investors’ conference at the weekend in the state capital Chennai.
The carmaker said it hoped the factory would become a “first-class electric vehicle production hub in the region” with the capacity to build 150,000 cars but gave few details of its plans. It said together with Tamil Nadu’s state government, it would “work toward a total investment of up to USD 2 billion”.
Despite harbouring global ambitions, VinFast has been hit by scathing reviews for its early EVs. The carmaker lost more than $1.4bn in the first three quarters last year and remains reliant on sales to other businesses owned by its parent company Vingroup.
Tamil Nadu is India’s biggest exporter of electronics and a hub for its automotive industry. Among the other groups that announced investments in the state at the government-organised Global Investors Meet on Sunday were South Korean carmaker Hyundai and Indian EV and ride-hailing company Ola.
Tata Electronics, which is aiming to become India’s first homegrown, full-service supplier to Apple, said it would invest Rs120.8bn ($1.45bn) to expand its operations in Tamil Nadu, where it makes enclosures for iPhones.
Tamil Nadu’s chief minister MK Stalin has set a target of building a $1tn economy in the state by 2030. The government of Prime Minister Narendra Modi, who is seeking re-election to a third five-year term this spring, has been trying to create jobs in manufacturing, including of EVs, an area in which India has been far slower to develop than its biggest regional rival China.
Tata Motors is the top-selling EV brand in India’s small market for battery-powered vehicles, followed by Chinese-owned MG Motor and Indian brand Mahindra.
“India is a blue-ocean market for EVs and a market which provides great scale for start-ups like VinFast,” said Neil Shah, an analyst with Counterpoint Research. However, Shah added, the company would “have its work cut out from establishing multilevel distribution channels, after-market service support and an EV portfolio priced in the sweet spot of $10,000”.
The Vietnamese carmaker was founded in 2017, with its flagship plant in northern Vietnam’s Haiphong, and launched its first internal combustion engine cars in 2019 before moving to an all-EV strategy in 2021.
Last year VinFast listed in the US through a merger with a special purpose acquisition company. The carmaker also announced plans to build plants in North Carolina and Indonesia as part of a global expansion plan.
Last week Vuong, who has ploughed some of his personal wealth into the company, took over as VinFast’s chief executive, swapping jobs with Le Thi Thu Thuy, whom the company said would “transition from her current role as CEO” and replace him as chair of the carmaker’s board of directors.
