VinFast VF 3: Disrupting the Affordable Car Market in Vietnam
Just 60 hours after opening early deposits for the VF 3 electric car, VinFast recorded 27,000 customer orders, all of which were non-refundable/non-transferable deposits. The appeal of the VF 3 has created an unprecedented phenomenon in the Vietnamese automotive market, as the previously best-selling Xpander Mitsubishi only achieved 20,000 sales in the whole of 2023.
Mounting Pressure on Automakers
Today’s affordable car market is considered quite crowded as almost every automaker offers models in this segment to attract customers and increase their market presence and competitiveness. Thus, when a new player emerges, the market quickly shuffles.
According to observations, several affordable A-segment models priced around 350 million VND are attracting consumers’ attention, such as the Kia Morning, Hyundai i10, and Toyota Wigo. With a more spacious interior, B-segment sedans like the Mitsubishi Attrage and Kia Soluto, which are the cheapest in their segment, are sharing the market for first-time car buyers or service business owners.
In the meantime, the C-segment has the MG5 from MG with a price of only about 360 million VND, which can easily persuade customers to spend. Not to mention, multi-purpose 7-seater vehicles like the Suzuki Ertiga and Hyundai Stargazer are also priced at just over 400 million VND.
Mr. Dao Khai Ngoc, owner of a car dealership in Thu Duc City, Ho Chi Minh City, attributes the appeal of the VinFast VF 3 to its low price of only 235 million VND (without a battery) or 315 million VND (with a battery). The arrival of the VF 3 forces some automakers to develop coping strategies to maintain their market share.
In the short term, brands like Kia, Mitsubishi, and MG have started offering attractive incentives to customers, such as discounts and waived registration fees. “In the long run, when launching new models, automakers will have to significantly upgrade their technology and add more features to retain customers,” Mr. Ngoc predicted.
Car dealerships are also impacted by the arrival of the VinFast VF 3 mini electric car. Mr. Vo Thanh Tuan, owner of a used car dealership in Binh Chanh District, Ho Chi Minh City, said that used car prices currently range from 200 to 300 million VND, with many options available.
Most first-time car buyers often choose affordable used cars to practice driving without worrying about scratches or dents in case of accidents. With the same budget, if they can buy a new car like the VF 3, they won’t hesitate to make that choice, said Mr. Tuan.
Automakers with small car models must offer competitive policies to maintain their market share.
Will the Market Change Easily?
Even though the VF 3 hasn’t cooled down yet, the automotive industry remains cautious when assessing the long-term impact of this model on the overall market.
Mr. Vo Thanh Tuan believes that the size of VinFast’s mini electric car is compact and suitable for personal use, but it doesn’t meet the needs of customers who want to use it for business purposes.
“The Wuling Hongguang Mini EV, a Chinese electric car that has been on the market for about a year, still has sluggish sales, despite its price of only 200 million VND (with a battery), which is 100 million VND cheaper than the VF 3,” Mr. Tuan compared.
According to Mr. Nguyen Trong Tan, CEO of Cho Tot, the segment of individual customers is easily influenced when deciding to buy a car because they now have an interesting additional option in the VF 3. However, for customers buying affordable cars for long-distance services, the impact may not be that significant.
Ms. Nguyen Thi Hien, owner of the Oto Hien system in Ho Chi Minh City, said, “The initial purchase price may be considered cheap, but you need to calculate the additional cost of renting a battery, which costs millions of VND per month. The compact size could be a factor that makes many people think twice. Even the Toyota Wigo is still criticized by many customers for being small and underpowered. For 300-400 million VND, there are many larger and more powerful gasoline models available.”
Not Yet a Replacement for Motorcycles
The potential customer group for the affordable car segment is those who currently use motorcycles and want to switch to cars. According to MSc. Tran Anh Tung, Head of Business Administration at the University of Economics and Finance in Ho Chi Minh City, the VF 3 will not easily become a replacement for motorcycles, as the infrastructure for charging stations may not improve significantly in the next 5-7 years.
Commenting on the popularity of the VF 3, Mr. Tung said that it is partly due to the strong media effect and partly because consumers are interested in and proud of the Vietnamese automotive brand. In addition, the soft price, favorable loan policies, and superior specifications compared to its Chinese rival Wuling are significant advantages for this Vietnamese-branded car.
