Vietnam’s global ambitions offer opportunity

Among the many things I did not expect to see in my lifetime is an electric car, made in Vietnam with a dealership in my community.

 Yet Vietnam’s Vinfast EV arrived in Canada in late 2022 with two smart looking SUVs as part of a plan to enter the North American market. It is a symbol of Vietnan’s aspirations as it takes over from China as a low-cost global manufacturer. Living standards are rising and the economy is being transformed into a manufacturing powerhouse.

VinFast is a privately-owned subsidiary of VinGroup, Vietnam’s largest conglomerate. VinFast  opened 10 Canadian company-owned dealerships including the one in Oakville, Ont. where I live. It had an ambitious plan to disrupt the EV market by selling directly to consumers online and via the showrooms. Cutting out the middleman kept prices down.

This year, amid a challenging market for EVs and Trump Administration tariff threats on Vietnamese products, VinFast scaled back in Canada, closing 5 dealerships. For now, the Oakville store remains open. The models in its showroom line up against the Tesla Model Y. (Tesla has a dealership  a few kilometres away.) The starting price of the VF 8 is $53,600, roughly 10% cheaper than Model Y. Its range and horsepower are a little less, but its warranty is gold plated – 10 years or 200,000 km.

Parent Vingroup is involved in many things. It builds houses and shopping centres, operates theme parks, manufactures drugs and makes cars and scooters. It owns private schools and a university called VinUni. VinUni which has Cornell University and the University of Pennsylvania as partners.

The Vingroup name was everywhere during a three week visit to Vietnam and Cambodia this winter, including its EV fleet of taxis with a distinctive light blue logo. The country is hungry for growth, prosperity and better lives. The people are friendly, welcoming and often English speaking. 

Many multinationals set up subsidiaries in Vietnam as a hedge against US-China trade tensions. It has been a sore point with the Trump Administration which sees Vietnam as a back door from China. They have a point. Some goods are transshipped through Vietnam and relabeled as Made in Vietnam. Other are shipped in pieces and then fully assembled.

Vietnam sends a third of all its exports to the US and is the third-largest source of America’s  trade deficit after China and Mexico. It needs access to the American market which is why it came to the table quickly to meet Trump’s demands.

Vietnam has accepted a 20% tariff on all exports and 40%on goods deemed transshipped. While that will squeeze profit margins, Vietnam is still one of Asia’s fastest growing economies. GDP is expected to grow between  6.2% and 6.8% in 2025, which exceeds India. The latter is involved in a tariff tussle of its own.

Vietnam has a young demographic. The median age of 33 compares with 40 in China and 41 in Canada. As this group forms households they also boost domestic demand for all kinds of goods.

Vietnam has embarked on a modernization of its education system. The focus is on what it calls STEM – science, technology, engineering and math. Since 2013 it has established 13 universities to foster AI, fintech, and smart agriculture. Within the next decade it wants all students to learn English starting in Grade 1.

The country has 102 million people and is the world’s 33^rd largest economy with GDP of US $400 billion a year. It is predicted to be in the top 20 by 2030. Its biggest exports are electronics and components, including such things as Samsung phones, Apple iPods, integrated circuits and  computers. Other big ticket exports include machinery, high voltage transformers, routers, modems and cables. Textiles, coffee, rice, seafood and furniture are also large categories.

For investors interested in a toehold there are several ways to go. One way is via multinationals with operations in Vietnam. Samsung is Vietnam’s largest investor and Unilever and Nestle are also big players.

 Another way is through the Van Eck Vectors Vietnam ETF, (NYSE: VNM) the biggest Vietnam-only ETF. (Recent close US $17.73)

VanEck Vectors Vietnam ETF (NYSE: VNM) (All figures in U.S. dollars.)

Background: The ETF was launched in 2009 and holds a market cap-weighted portfolio of Vietnamese stocks. It holds 52 of the largest and most liquid publicly listed companies in Vietnam.  

Performance: The ETF has volatile as emerging market investments often are. It fell sharply late last year on tariff fears but has recovered that ground and more. The shares are up 55% year-to-date to the current price as Vietnam concluded a trade deal with the US.

 Key Metrics: The ETF has $554 million in assets and comes with a 0.5% management fee. Its holdings are concentrated in financials (30%), followed by real estate (28%) and consumer staples (18%).

The top three holdings are Vinhomes, Vietnam’s largest commercial real estate developer (8.5%), Vingroup, its parent  (8.3%) and Hoa Phat Group, Vietnam’s largest steel producer. (7.3%)

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.