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 a substitute, 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 widespread than Seize sooner or later,” Dat instructed Al Jazeera.

“I ended up working for Xanh SM because it saves gasoline value, it’s pleasant for the surroundings 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 providers by means of its app.

Whereas Xanh SM’s mint-hued electrical automobiles and scooters have grow 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 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 data present that 82 p.c of its gross sales in 2023 got here from different corporations 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 Battle School who focuses on Southeast Asian politics and safety points, mentioned that promoting Vinfast automobiles to Xanh SM is a win-win technique within the quick time period for Vuong, who holds greater than a 90 p.c 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 giant sums of cash into Vinfast, an unproven model.

“I feel that it’s fairly good what they’re doing with the taxis,” Abuza instructed Al Jazeera. “[But] the issue with these nationwide champions is that they grow to be too massive 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 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 providers accessible in almost half the nation, and expanded into neighbouring Laos.

In a survey carried out by Ho Chi Minh Metropolis-based market researcher Choice 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 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 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 instructed Al Jazeera.

Lengthy Nguyen, advertising director at native electrical motorcycle firm Dat Bike, mentioned shoppers 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 p.c annually. This pattern exhibits that customers 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 grow to be one of many main suppliers of electrical mobility options within the area,” a Vingroup spokesperson instructed Al Jazeera by e mail, including that the corporate plans to increase into three or 4 extra international locations by 2025.

Abuza mentioned 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 could suppose,” Abuza mentioned, 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 mentioned of Vuong’s enterprise empire.

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

“Vingroup enjoys assist from the federal government and the general public,” the spokesperson mentioned.  “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 mentioned 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 accountable for the price of any injury to their automobile if they’re deemed to have been negligent.

“Individuals instructed me lots of their drivers returned the bikes and stop working,” he mentioned. “I used to be instructed if their bikes bought damaged, the corporate will deduct a variety 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 12 months amid rocky growth 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 powerful business. It requires some huge cash to get within the recreation, and it requires a variety of scale to remain in it, to generate income at it,” Invoice Russo, former Chrysler government and founding father of the Shanghai-based consulting agency Automobility Restricted, instructed Al Jazeera.

Russo mentioned that competitors is particularly fierce round value.

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

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

“They get panned in each evaluation. They’re costly. You should buy a significantly better automobile for much less cash,” he mentioned.

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

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

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

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

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

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 generate income for Vinfast.”

In a November 19 assertion, Vingroup mentioned it will 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 may run out of cash earlier than Vinfast succeeds, Russo mentioned.

“They’ve, clearly, the founder’s cash, but it surely’s not going to final ceaselessly,” he mentioned.

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

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

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

Further reporting by Nguyen Hao Thanh Thao