Vietnam’s richest man is vying to dethrone 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 standard than Seize sooner or later,” Dat informed Al Jazeera.

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

Not like its rival Seize, Xanh SM rents out automobiles to gig drivers along with offering ride-hailing companies by its app.

Whereas Xanh SM’s mint-hued electrical automobiles and scooters have turn out to be ubiquitous on Vietnam’s streets since beginning operations in April 2023, some analysts query the corporate’s progress 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 delivery 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 % 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 response to a report by the Reuters information company.

Zachary Abuza, a professor on the Nationwide Struggle Faculty who focuses on Southeast Asian politics and safety points, mentioned 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 % stake in each companies.

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

“I feel that it’s fairly good 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 huge to fail,” he added.

“The federal government has this vested curiosity in them staying alive, which permits them to do very dangerous issues, type of creating this ethical hazard figuring out that the federal government will in the end 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 almost 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 12 months, 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 day by day navigating the streets of Ho Chi Minh Metropolis, a full-time Seize driver, who requested to stay nameless, mentioned he has seen Xanh SM’s progress 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, mentioned customers are more and more searching for non-gasoline powered choices like those Xanh SM is offering.

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

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 develop into three or 4 extra nations by 2025.

Abuza mentioned that Xanh SM would face excessive prices going worldwide, with hefty bills concerned in organising operations, delivery 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 may suppose,” Abuza mentioned, including that the ride-hailer is unlikely to obtain the identical authorities help given to Vuong on his dwelling 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 mentioned of Vuong’s enterprise empire.

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

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

Xanh SM might face challenges at dwelling, too.

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

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

Whereas Xanh SM is working to ascertain dominance in Vietnam and develop, Vuong faces stiff competitors within the EV trade 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 growth efforts.

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

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

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

Russo mentioned that competitors is particularly fierce round price.

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

Abuza additionally famous Vinfast’s costs and the poor evaluations 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 mentioned.

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 help its institution section,” the spokesperson mentioned.

Vingroup, nevertheless, additionally appears to be dealing with 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 places throughout the nation.

“They’re desperately attempting to boost capital,” Abuza mentioned.

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 on daily basis to earn money for Vinfast.”

In a November 19 assertion, Vingroup mentioned it could lend Vinfast $1.4bn by the tip 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 might run out of cash earlier than Vinfast succeeds, Russo mentioned.

“They’ve, clearly, the founder’s cash, however it’s not going to final endlessly,” he mentioned.

In Ho Chi Minh Metropolis, Dat is completely satisfied together with his alternative of a Xanh SM EV, general.

“The one drawback of Xanh SM I can consider is that the bikes can not experience immediately like gasoline bikes,” he mentioned.

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

Further reporting by Nguyen Hao Thanh Thao