VinFast’s new sales approach has US car dealers cautious but interested

By Ben Klayman

(Reuters) -Vietnamese electric-vehicle maker VinFast, which made a splash this week when its shares debuted on the Nasdaq, has stirred a mix of caution and interest among dealers with a recent change in how it will distribute its cars in the U.S. market.

The carmaker, which has shipped nearly 3,000 vehicles to North America since late last year, said on Tuesday it was changing its distribution model, which has been based on Tesla (NASDAQ:)’s direct-to-consumer approach.

Now it wants to sell through dealers as well.

Several U.S. dealers contacted by Reuters are open to the idea, but said they need to hear more details about VinFast’s plans, including sales strategy, requirements for dealers, the company’s parts distribution plan and the vehicle warranty.

“Is there room for more brands? Yeah, there probably is. It’s just too early to tell,” said George Glassman, president of Glassman Automotive Group, which sells five automotive brands outside Detroit. “I’d need to see more before I could make an intelligent decision.”

VinFast made its U.S. market debut on Tuesday and shares soared, at one point giving the startup a market valuation of $85 billion – far higher than that of Ford or General Motors (NYSE:) at the time. Since then, VinFast shares have retreated, and were down 33.6% at $20 as of Thursday’s close.

As VinFast ramps up efforts, it faces tough tests. The new hybrid sales plan is just another challenge and the luxury carmaker is already talking to dealers.

“Opening our own stores is great but it takes a lot of time,” CEO Le Thi Thu Thuy told Reuters on Tuesday. “Joining forces with other partners to go faster has always been our nature.”

Officials at VinFast, which has opened 122 showrooms globally as of June with most in the U.S. West, said aside from direct-to-customer sales, the carmaker would partner with dealers to open new points of sale in North America and other global markets.

“We are currently defining the terms of this new model and discussing with potential partners. More details will be announced in due course,” Thuy said in a statement.

U.S. dealers said there are too many unanswered questions, including how VinFast will distribute parts needed to make repairs.

‘DEVIL’S IN THE DETAILS’

“The dealer has to be concerned with their (own) reputation,” said Scott Fink, CEO of Fink Automotive Group, which owns VW and Subaru (OTC:) stores near Tampa, Florida. “If I sell a car to you and you can’t get a fender, you’re going to be pissed off at me. I’m not going to do that.”

“The devil’s in the details,” he added.

While Tesla has established itself as EV market leader, other startups have struggled to get off the ground, dealers said. On top of that, VinFast will be competing with established brands with their own EVs, including GM, Ford and Hyundai .

“The first thing you have to look at is are you going to be around in five years? That’s a big concern,” said Andrew DiFeo, dealer principal at Hyundai of St. Augustine, south of Jacksonville, Florida.

Several dealers said VinFast may need to offer sweetened profit margins to dealers to account for the added risk. On top of that, the automaker may need to provide industry-leading warranty coverage on its vehicles to assure buyers.

Those possibilities leave industry consultant and former GM executive Warren Browne cold.

“It is a death strategy,” he said of the plan to use dealers. “There is too much value extracted by serving dealers. That’s a strategy Wall Street will whip them on.”

But with dealerships selling for historic prices, enough dealer owners will make the bet, said Rhett Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, which sells 10 auto brands. Many also appreciate that VinFast is building a U.S. plant.

Dealers also said the lack of an established name is not a deal-breaker as Toyota, Honda and Hyundai all started small and grew into successes.

“If it’s a good product and it’s got a great warranty on it, Americans will buy it,” Ricart said.

Ultimately, dealers are always looking for unique opportunities, said Beau Boeckmann, president of Galpin Motors, which sells 12 brands in the Los Angeles area including EV startup Polestar.

Boeckmann, who visited VinFast’s plant in Vietnam last year and met with CEO Thuy, remains open to the opportunity.

“Dealers are entrepreneurial and they’re risk-takers,” he said. “Sales people love to be sold.”