Vietnam’s richest man is vying to dethrone Asia’s ride-hailing king, Seize

Ho Chi Minh, Vietnam – When Dat had to decide on a ride-hailing app to work with as a gig driver, he purposely determined towards Seize, the main participant in Southeast Asia.

As an alternative, the 23-year-old was persuaded by the environmentally pleasant advertising and homegrown standing of Xanh SM, an electrical taxi and motorcycle service based by Pham Nhat Vuong, the chairman of the Vietnamese mega-conglomerate Vingroup and Vietnam’s richest man.

“Xanh SM will certainly be extra well-liked than Seize sooner or later,” Dat instructed Al Jazeera.

“I ended up working for Xanh SM because it saves gas value, it’s pleasant for the atmosphere and lastly, it’s a Vietnamese firm.”

In contrast to its rival Seize, Xanh SM rents out autos to gig drivers along with offering ride-hailing companies by way of its app.

Whereas Xanh SM’s mint-hued electrical automobiles and scooters have develop into ubiquitous on Vietnam’s streets since beginning operations in April 2023, some analysts query the corporate’s development potential and Vuong’s technique of utilizing the platform to push Vinfast, his model of Vietnamese electrical autos (EVs).

Vuong’s Vingroup based Vinfast because the nation’s first auto model in 2017.

Since transport its first batch of 999 automobiles throughout the Pacific from northern Haiphong to California, United States, in 2022, the corporate has been beset with losses and delayed manufacturing facility openings.

Vinfast’s monetary information present that 82 p.c of its gross sales in 2023 got here from different firms owned by Vuong, together with Xanh SM.

Xanh SM spent $839m shopping for electrical taxis and scooters that 12 months, in addition to signing a $419m deal to purchase 14,600 extra EVs, in accordance with a report by the Reuters information company.

Zachary Abuza, a professor on the Nationwide Warfare School who focuses on Southeast Asian politics and safety points, stated that promoting Vinfast automobiles to Xanh SM is a win-win technique within the brief time period for Vuong, who holds greater than a 90 p.c stake in each corporations.

Nonetheless, the Vietnamese authorities’s backing of Vuong’s bigger EV ambitions has led to dangerous enterprise practices, Abuza stated, pointing to the founder’s willingness to pour massive sums of cash into Vinfast, an unproven model.

“I believe that it’s fairly sensible what they’re doing with the taxis,” Abuza instructed Al Jazeera. “[But] the issue with these nationwide champions is that they develop into too huge to fail,” he added.

“The federal government has this vested curiosity in them staying alive, which permits them to do very dangerous issues, form of creating this ethical hazard figuring out that the federal government will finally 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 companies obtainable in practically half the nation, and expanded into neighbouring Laos.

In a survey carried out by Ho Chi Minh Metropolis-based market researcher Resolution Lab earlier this 12 months, 36 p.c of respondents selected Xanh SM as their most popular ride-hailing app, making it second solely to Seize, which was chosen by 62 p.c of these surveyed.

Spending eight to 12 hours each day navigating the streets of Ho Chi Minh Metropolis, a full-time Seize driver, who requested to stay nameless, stated he has seen Xanh SM’s development firsthand.

“I can’t inform or predict their future however I can see that they’re gaining popularity,” the person in his 40s instructed Al Jazeera.

Lengthy Nguyen, advertising director at native electrical motorcycle firm Dat Bike, stated customers are more and more on the lookout for non-gasoline powered choices like those Xanh SM is offering.

“The demand for electrical bikes has been rising steadily at round 30 p.c annually. This pattern reveals that buyers are more and more shifting from gasoline to electrical,” he stated.

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

“Xanh SM’s long-term goal is to develop into one of many main suppliers of electrical mobility options within the area,” a Vingroup spokesperson instructed Al Jazeera by electronic mail, including that the corporate plans to broaden into three or 4 extra international locations by 2025.

Abuza stated that Xanh SM would face excessive prices going worldwide, with hefty bills concerned in establishing operations, transport autos, coping with customs and tariffs and establishing charging infrastructure for EVs.

“I’m not saying they’ll’t do it. It’s simply not going to be as low cost or straightforward as they may suppose,” Abuza stated, including that the ride-hailer is unlikely to obtain the identical authorities assist given to Vuong on his house turf.

“They get very low cost land, they get entry to capital. There are many methods in a socialist system for the federal government to subsidise them,” he stated of Vuong’s enterprise empire.

The Vingroup spokesperson stated the corporate recognises the challenges to enlargement and doesn’t obtain particular remedy in Vietnam.

“Vingroup enjoys assist from the federal government and the general public,” the spokesperson stated.  “Nonetheless, we don’t obtain any particular rights nor privileges.”

Xanh SM could face challenges at house, too.

The Ho Chi Minh Metropolis Seize driver who wished to stay nameless stated a few of his acquaintances complain concerning the high quality of Xanh SM’s electrical scooters and the very fact they are often held accountable for the price of any harm to their car if they’re deemed to have been negligent.

“Individuals instructed me lots of their drivers returned the bikes and stop working,” he stated. “I used to be instructed if their bikes bought damaged, the corporate will deduct numerous their cash.”

Whereas Xanh SM is working to determine dominance in Vietnam and broaden, Vuong faces stiff competitors within the EV business and heavy losses at Vinfast.

Regardless of the gross sales to Xanh SM and different Vingroup-affiliated manufacturers, Vinfast reported in a September 20 assertion that it misplaced $773.5m within the second quarter of this 12 months amid rocky enlargement efforts.

The loss was a 20 p.c improve from the primary quarter and up 40 p.c from the identical interval in 2023.

In July, Vinfast introduced it will push again plans for a $2bn manufacturing plant within the US state of North Carolina to 2028.

“It’s a robust business. It requires some huge cash to get within the sport, and it requires numerous scale to remain in it, to make cash at it,” Invoice Russo, former Chrysler govt and founding father of the Shanghai-based consulting agency Automobility Restricted, instructed Al Jazeera.

Russo stated that competitors is particularly fierce round value.

“One other factor that Vinfast will battle with is [that] their dream is simply attainable in case you can are available at a really inexpensive value level,” he stated, including that China’s BYD presents EVs at cheaper costs.

Abuza additionally famous Vinfast’s costs and the poor critiques of its EVs.

“They get panned in each evaluation. They’re costly. You should purchase a significantly better automotive for much less cash,” he stated.

The Vingroup spokesperson acknowledged that Vinfast faces challenges as a “younger electrical car producer” and an “rising model”.

“VinFast has a long-term imaginative and prescient and has reserved the mandatory capital to assist its institution part,” the spokesperson stated.

Vingroup, nonetheless, additionally appears to be dealing with monetary struggles and promoting off subsidiaries to remain afloat.

In March, it bought 41.5 p.c of its stake in Vincom Retail, its shopping center subsidiary with 83 areas throughout the nation.

“They’re desperately making an attempt to boost capital,” Abuza stated.

Vuong doesn’t seem like disheartened.

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

“Till I run out of cash,” he replied. “I’m nonetheless working day by day to make cash for Vinfast.”

In a November 19 assertion, Vingroup stated it will lend Vinfast $1.4bn by the top of 2026 and that Vuong would personally give $2.1bn to the EV maker.

However with a downturn within the EV market and stiff competitors, Vuong may run out of cash earlier than Vinfast succeeds, Russo stated.

“They’ve, clearly, the founder’s cash, nevertheless it’s not going to final perpetually,” he stated.

In Ho Chi Minh Metropolis, Dat is completely happy along with his selection of a Xanh SM EV, general.

“The one drawback of Xanh SM I can consider is that the bikes can’t journey immediately like gas bikes,” he stated.

“However to me, it’s probably not a drawback as I can relaxation whereas it’s charging.”

Extra reporting by Nguyen Hao Thanh Thao