Vietnam’s richest guy vies to dethrone SE Asia’s ride-hailing king, Take hold of | Industry and Financial system

Ho Chi Minh, Vietnam – When Dat had to select a ride-hailing app to paintings with as a gig motive force, he purposely determined in opposition to Take hold of, the eminent participant in Southeast Asia.

Rather, the 23-year-old used to be i’m sure by way of the environmentally pleasant advertising and homegrown condition of Xanh SM, an electrical taxi and motorcycle carrier based by way of Pham Nhat Vuong, the chairman of the Vietnamese mega-conglomerate Vingroup and Vietnam’s richest guy.

“Xanh SM will definitely be more popular than Grab in the future,” Dat instructed Al Jazeera.

“I ended up working for Xanh SM as it saves fuel cost, it’s friendly for the environment and lastly, it’s a Vietnamese company.”

In contrast to its rival Take hold of, Xanh SM rents out automobiles to gig drivers along with offering ride-hailing products and services via its app.

Pace Xanh SM’s mint-hued electrical automobiles and scooters have change into ubiquitous on Vietnam’s streets since origination operations in April 2023, some analysts query the corporate’s expansion possible and Vuong’s technique of the use of the platform to push Vinfast, his logo of Vietnamese electrical automobiles (EVs).

Vuong’s Vingroup based Vinfast as the rustic’s first auto logo in 2017.

Since delivery its first accumulation of 999 automobiles around the Pacific from northern Haiphong to California, United States, in 2022, the corporate has been beset with losses and not on time manufacturing unit openings.

Vinfast’s monetary data display that 82 % of its gross sales in 2023 got here from alternative firms owned by way of Vuong, together with Xanh SM.

Xanh SM spent $839m purchasing electrical taxis and scooters that yr, in addition to signing a $419m offer to shop for 14,600 extra EVs, in step with a file by way of the Reuters information company.

Zachary Abuza, a schoolteacher on the Nationwide Struggle School who makes a speciality of Southeast Asian politics and safety problems, stated that promoting Vinfast automobiles to Xanh SM is a win-win technique within the scale down time period for Vuong, who holds greater than a 90 % stake in each corporations.

Nonetheless, the Vietnamese govt’s backing of Vuong’s greater EV ambitions has resulted in dangerous industry practices, Abuza stated, pointing to the founder’s willingness to pour massive sums of cash into Vinfast, an unproven logo.

“I think that it’s quite smart what they’re doing with the taxis,” Abuza instructed Al Jazeera. “[But] the problem with these national champions is that they become too big to fail,” he added.

“The government has this vested interest in them staying alive, which allows them to do very risky things, kind of creating this moral hazard knowing that the government will ultimately bail them out.”

Since debuting within the nation’s capital Hanoi, Xanh SM has expanded its fleet of Vinfast EVs to twenty,000 automobiles and 22,000 motorbikes, made its products and services to be had in just about part the rustic, and expanded into neighbouring Laos.

In a survey performed by way of Ho Chi Minh Town-based marketplace researcher Determination Lab previous this yr, 36 % of respondents selected Xanh SM as their most popular ride-hailing app, making it 2d handiest to Take hold of, which used to be selected by way of 62 % of the ones surveyed.

Spending 8 to twelve hours day by day navigating the streets of Ho Chi Minh Town, a full-time Take hold of motive force, who requested to stay nameless, stated he has distinguishable Xanh SM’s expansion firsthand.

“I can’t tell or predict their future but I can see that they are becoming more popular,” the person in his 40s instructed Al Jazeera.

Lengthy Nguyen, advertising director at native electrical motorcycle corporate Dat Motorbike, stated shoppers are increasingly more in search of non-gasoline powered choices like those Xanh SM is offering.

“The demand for electric bikes has been growing steadily at around 30 percent each year. This trend shows that consumers are increasingly shifting from gasoline to electric,” he stated.

However like Vinfast, Xanh SM’s ambitions achieve additional afield.

“Xanh SM’s long-term objective is to become one of the leading providers of electric mobility solutions in the region,” a Vingroup spokesperson instructed Al Jazeera by way of electronic mail, including that the corporate plans to amplify into 3 or 4 extra international locations by way of 2025.

Abuza stated that Xanh SM would face top prices going world, with hefty bills considering putting in place operations, delivery automobiles, coping with customs and price lists and settingup charging infrastructure for EVs.

“I’m not saying they can’t do it. It’s just not going to be as cheap or easy as they might think,” Abuza stated, including that the ride-hailer is not going to obtain the similar govt aid given to Vuong on his house turf.

“They get very cheap land, they get access to capital. There are plenty of ways in a socialist system for the government to subsidise them,” he stated of Vuong’s industry empire.

The Vingroup spokesperson stated the corporate recognises the demanding situations to growth and does no longer obtain particular remedy in Vietnam.

“Vingroup enjoys support from the government and the public,” the spokesperson stated.  “However, we do not receive any special rights nor privileges.”

Xanh SM might face demanding situations at house, too.

The Ho Chi Minh Town Take hold of motive force who wanted to stay nameless stated a few of his acquaintances whinge concerning the feature of Xanh SM’s electrical scooters and the truth they may be able to be held chargeable for the price of any injury to their car if they’re deemed to were negligent.

“People told me many of their drivers returned the bikes and quit working,” he stated. “I was told if their bikes got broken, the company will deduct a lot of their money.”

Pace Xanh SM is operating to ascertain dominance in Vietnam and amplify, Vuong faces stiff pageant within the EV trade and large losses at Vinfast.

In spite of the gross sales to Xanh SM and alternative Vingroup-affiliated manufacturers, Vinfast reported in a September 20 remark that it misplaced $773.5m in the second one quarter of this yr amid rocky growth efforts.

The loss used to be a 20 % build up from the primary quarter and up 40 % from the similar length in 2023.

In July, Vinfast introduced it could chase away plans for a $2bn production plant in the USA order of North Carolina to 2028.

“It is a tough industry. It requires a lot of money to get in the game, and it requires a lot of scale to stay in it, to make money at it,” Invoice Russo, former Chrysler govt and founding father of the Shanghai-based consulting company Automobility Restricted, instructed Al Jazeera.

Russo stated that pageant is particularly fierce round value.

“Another thing that Vinfast will struggle with is [that] their dream is only possible if you can come in at a very affordable price point,” he stated, including that China’s BYD deals EVs at inexpensive costs.

Abuza additionally famous Vinfast’s costs and the destitute evaluations of its EVs.

“They get panned in every review. They’re expensive. You can buy a much better car for less money,” he stated.

The Vingroup spokesperson stated that Vinfast faces demanding situations as a “young electric vehicle manufacturer” and an “emerging brand”.

“VinFast has a long-term vision and has reserved the necessary capital to support its establishment phase,” the spokesperson stated.

Vingroup, on the other hand, additionally appears to be going through monetary struggles and promoting off subsidiaries to stick afloat.

In March, it bought 41.5 % of its stake in Vincom Retail, its buying groceries mall subsidiary with 83 places around the nation.

“They’re desperately trying to raise capital,” Abuza stated.

Vuong does no longer seem to be sad.

In a June interview with Bloomberg, Vuong used to be requested how lengthy he would proceed pouring cash into Vinfast.

“Until I run out of money,” he answered. “I’m still working every day to make money for Vinfast.”

In a November 19 remark, Vingroup stated it could provide Vinfast $1.4bn by way of the top of 2026 and that Vuong would individually give $2.1bn to the EV maker.

However with a downturn within the EV marketplace and stiff pageant, Vuong may running over of cash sooner than Vinfast succeeds, Russo stated.

“They have, obviously, the founder’s money, but it’s not going to last forever,” he stated.

In Ho Chi Minh Town, Dat is excited along with his selection of a Xanh SM EV, total.

“The only disadvantage of Xanh SM I can think of is that the bikes cannot ride instantly like fuel bikes,” he stated.

“But to me, it’s not really a disadvantage as I can rest while it is charging.”

Alternative reporting by way of Nguyen Hao Thanh Thao