What’s behind VinFast’s investment ambitions in India?
Indian-born RMIT Senior Lecturer Dr. Majo George shared his thoughts on a Vietnamese company's strategic move to tap into one of the world's most populous nations and rapidly expanding other markets.
VinFast's decision to open a manufacturing plant in India is a strategic maneuver that not only capitalizes on the potential of a burgeoning electric vehicle (EV) market, but also positions the company favorably against future competitors.
On February 25, Vietnam's leading EV manufacturer VinFast, officially broke ground for its first integrated EV manufacturing facility in the Indian state of Tamil Nadu.
This venture into the Indian market is a significant step in VinFast's global expansion and reflects its ambition to penetrate the world's third largest vehicle market. The initiative involves a significant investment of up to $2 billion, with a planned commitment of $500 million in the first five years of the project. The integrated EV manufacturing facility is expected to be operational in 2026.
| Vietnamese automaker VinFast is building a manufacturing plant in India. Photos: Unsplash |
The state of Tamil Nadu is already a major hub for automotive manufacturing and is home to production facilities of global giants such as BMW, Hyundai and Renault-Nissan. VinFast's chosen site in Thoothukudi, Tamil Nadu, is expected to become a world-class EV manufacturing hub with an expected annual capacity of up to 150,000 units.
The Tamil Nadu plant will serve as VinFast's third manufacturing project and is being touted as the most significant investment in Tamil Nadu's history. In addition to the manufacturing facility, VinFast plans to establish a nationwide dealer network in India to create a strong brand presence and quickly connect with customers across the country.
This initiative is an important step in promoting clean transportation in India. It is in line with the Indian government's ambitious goal of achieving 30% electrification by 2030. The Government of Tamil Nadu has pledged its support for this project by committing to provide cleared land, uninterrupted power supply and other infrastructure support. In addition, the project is expected to create approximately 3,500 local jobs and make a significant contribution to the local economy.
This venture offers VinFast an unparalleled opportunity to leverage India's generous government policies, positioning the nation as a pivotal hub for exporting cars globally. India's robust infrastructure, stable government policies at both central and state levels, a skilled and youthful workforce, and a vast domestic market make it an ideal location for VinFast's ambitious expansion.
The Indian EV market is projected to reach a remarkable $100 billion, making it a lucrative opportunity for global players. However, it is still in its nascent stages of development and offers a unique opportunity for early movers like VinFast to establish brand presence and loyalty.
VinFast's foray into the Indian market comes at a pivotal moment, strategically preceding the anticipated entry of EV giant Tesla into the Indian manufacturing industry. This timing is advantageous for VinFast, as establishing a foothold before Tesla could provide a significant competitive edge.
Given the Indian government’s commitment to transitioning to EVs, the local sales of VinFast cars in India could potentially surpass their sales in Vietnam, provided the company effectively markets its cars to the Indian consumer base.
With the aggressive pricing and futuristic styling, of its EVs, VinFast has the potential to capture a significant share of the Indian EV market. This could catalyse the company's growth in the wake of fluctuating market dynamics in the US.
| Dr. Majo George, Senior Lecturer, Logistics and Supply Chain Management, The Business School, RMIT University Vietnam |
The connection between Vietnam and India dates back centuries and further enhances the potential for VinFast in the Indian market. As Vietnam has become a popular tourist destination, many people in India are already familiar with VinFast and its vehicles. The cultural similarities between the two nations, reflected in a shared preference for SUVs, sedans, and other electric ones, including two- and three-wheelers, present a unique advantage for VinFast.
Moreover, there is a substantial opportunity for VinFast to venture into the development of electric batteries, catering not just to the Indian market but also to the global EV market. Additionally, exploring the Indian taxi car market under VinFast GSM could be another lucrative avenue, tapping into a vast and growing sector.
VinFast should also focus on two new sectors: heavy and transport vehicles. The company's existing prowess in manufacturing electric buses aligns perfectly with the current trend of Indian state governments transitioning their traditional bus fleets to electric models.
The heavy transportation industry, especially the production of electric trucks, is another area ripe for exploration. With state-of-the-art technology and the visionary leadership of Mr Pham Nhat Vuong, VinFast is well-positioned to conduct further research and potentially dominate this segment. The relaxed policies in India provide an inviting environment for such innovative ventures.
VinFast’s expansion into India represents a strategic move to tap into one of the world's most populous nations and rapidly expanding EV markets. It signifies the company's commitment to sustainable development and a vision of a zero-emission transportation future, bringing economic benefits and contributing to the region's green energy transition.
