Vietnam’s richest man vies to dethrone SE Asia’s ride-hailing king, Grab | Business and Economy

Ho Chi Minh, Vietnam – When Dat had to decide on a ride-hailing app to work with as a gig driver, he purposely determined in opposition to 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 bike 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 fashionable than Seize sooner or later,” Dat informed Al Jazeera.

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

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

Whereas Xanh SM’s mint-hued electrical vehicles and scooters have turn out to be 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 automobiles (EVs).

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

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

Vinfast’s monetary data present that 82 % 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 yr, 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 Struggle School who focuses on Southeast Asian politics and safety points, stated that promoting Vinfast vehicles to Xanh SM is a win-win technique within the brief time period for Vuong, who holds greater than a 90 % 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 informed Al Jazeera. “[But] the issue with these nationwide champions is that they turn out to be too large to fail,” he added.

“The federal government has this vested curiosity in them staying alive, which permits them to do very dangerous issues, sort of creating this ethical hazard realizing 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 vehicles and 22,000 motorbikes, made its companies out there in practically half the nation, and expanded into neighbouring Laos.

In a survey carried out by Ho Chi Minh Metropolis-based market researcher Determination Lab earlier this yr, 36 % of respondents selected Xanh SM as their most popular ride-hailing app, making it second solely to Seize, which was chosen by 62 % 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 rising in popularity,” the person in his 40s informed Al Jazeera.

Lengthy Nguyen, advertising director at native electrical bike firm Dat Bike, stated shoppers are more and more in search of non-gasoline powered choices like those Xanh SM is offering.

“The demand for electrical bikes has been rising steadily at round 30 % every year. This development exhibits 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 turn out to be one of many main suppliers of electrical mobility options within the area,” a Vingroup spokesperson informed Al Jazeera by e-mail, including that the corporate plans to increase into three or 4 extra nations by 2025.

Abuza stated that Xanh SM would face excessive prices going worldwide, with hefty bills concerned in organising operations, transport automobiles, 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 simple as they could suppose,” Abuza stated, including that the ride-hailer is unlikely to obtain the identical authorities help given to Vuong on his residence 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 help from the federal government and the general public,” the spokesperson stated.  “Nevertheless, we don’t obtain any particular rights nor privileges.”

Xanh SM could face challenges at residence, too.

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

“Individuals informed me lots of their drivers returned the bikes and stop working,” he stated. “I used to be informed if their bikes obtained damaged, the corporate will deduct a whole lot of their cash.”

Whereas Xanh SM is working to ascertain dominance in Vietnam and increase, 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 yr amid rocky enlargement efforts.

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

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

“It’s a powerful business. It requires some huge cash to get within the recreation, and it requires a whole lot of scale to remain in it, to become profitable at it,” Invoice Russo, former Chrysler government and founding father of the Shanghai-based consulting agency Automobility Restricted, informed Al Jazeera.

Russo stated that competitors is very fierce round price.

“One other factor that Vinfast will wrestle with is [that] their dream is simply doable in the event you can are available at a really inexpensive worth level,” he stated, including that China’s BYD affords EVs at cheaper costs.

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

“They get panned in each assessment. They’re costly. You should purchase a a lot better automobile 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 required capital to help its institution part,” the spokesperson stated.

Vingroup, nevertheless, additionally appears to be going through monetary struggles and promoting off subsidiaries to remain afloat.

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

“They’re desperately attempting to lift capital,” Abuza stated.

Vuong doesn’t look 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 become profitable for Vinfast.”

In a November 19 assertion, Vingroup stated it might 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, however it’s not going to final perpetually,” he stated.

In Ho Chi Minh Metropolis, Dat is blissful together with his selection of a Xanh SM EV, total.

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

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

Extra reporting by Nguyen Hao Thanh Thao