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Taxpayer-Subsidized VinFast Is Swamped in Billions of Red Flags

The green revolution is costing taxpayers plenty of dollars and cents.

President Joe Biden has engaged in a global subsidy arms race, bribing multinational corporations to establish a presence in the United States and reshore their operations in the world’s largest economy. States and cities have also joined the subsidy parade, giving companies like VinFast Auto billions. But while taxpayers are on the hook for the seed money, what happens if these firms bleed red ink or fail and shutter their doors? Since green energy is believed to be a guaranteed moneymaker, nobody has stopped to think about this possibility.

Revving Up VinFast in America

Have you ever heard of VinFast? Outside of Vietnam, not too many consumers are aware of this company. Still, elected officials thought it would be a wise investment to extend more than $1 billion to the organization in exchange for an electric vehicle factory.

In July 2022, VinFast Auto, a Vietnamese automotive firm headquartered in Singapore, received a $1.2 billion incentive package from the North Carolina government. The funding includes $450 million in state appropriations to cover site preparations, road improvements, and additional sewer and water infrastructure. Chatham County, where the manufacturing facility will be constructed, tossed in $400 million. Commercial enterprises in the state also chipped in hundreds of millions of dollars.

So, what do citizens receive for being forced to finance the largest taxpayer subsidy in North Carolina history? The project, scheduled for completion in July 2024, would produce and assemble electric cars and buses. Moreover, the facility is expected to create an estimated 7,000 local jobs and provide direct and indirect benefits to the state and local economy.

Biden celebrated the news, claiming that his economic strategy produces results. “Our efforts to build a clean energy economy are driving companies to make more in America rebuild our supply chains here at home, and ultimately bring down costs for the American people,” he said in a statement.

Unfortunately, this arrangement might become another Solyndra for North Carolina taxpayers as many red flags are beginning to be planted on the road to a potential blunder.

Bad News in the Making?

First, $1.2 billion in state subsidies, plus more from the private sector, should be enough to create a factory to manufacture EVs. But VinFast also raised at least $4 billion globally from financial institutions, including Credit Suisse Group AG and Citigroup Global Markets.

GettyImages-1603069053 VinFast

(Photo by Jakub Porzycki/NurPhoto via Getty Images)

Second, VinFast might be a little too ambitious, especially compared to some of its industry rivals. The company plans to deliver as many as one million cars worldwide in the next five years. The six-year-old brand presently delivers around 10,000 per quarter. By comparison, the only electric automaker on the planet that produces and sells at least one million EVs a year is Elon Musk’s Tesla Motors Inc. In addition, VinFast is targeting the India and Indonesia markets to sell its cars, which industry observers warn will be unlikely since Ford and General Motors have already tried and failed.

Third, the financial markets see something wrong with the automaker – and perhaps for good reason.  VinFast confirmed in its third-quarter earnings report that it lost $622.9 million, leaving the company on track to record its most significant annual loss since the coronavirus pandemic. The quarterly net loss was nearly 34% higher year-over-year. Additionally, VinFast’s losses have exceeded $5 billion since 2021. The share price has tanked in 2023, collapsing 80% year-to-date to around $7. Market analysts, pointing to other flash-in-the-pan EV makers Lucid Motors and Rivian, say the valuations were unsustainable. Even insiders have been ditching their holdings, selling more than 72 million shares.

Road Paved With Green Energy

In the coming years, once two-decade-high interest rates travel entirely through the global financial system, there will be a trail of bankruptcies, insolvencies, and unpaid IOUs. It will not be President Biden, state governors, or mayors who will be left footing the bills for these lavish green energy subsidies. Instead, taxpayers will be punished for their elected officials’ misguided deeds, whether for bailouts or losses. When an industry needs to be immensely subsidized, maybe it is not a great idea.

Read More From Andrew Moran

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