VinFast hopes to make most with battery leasing program, separate from purchase price

As VinFast begins setting up showrooms in Canada, the Vietnam-based auto startup says it’s confident that its unique battery leasing program will resonate with consumers when it launches the VF8 and VF9 electric crossovers this year.

“VinFast did collect both qualitative and quantitative market feedback regarding battery subscription,” said VinFast Canada CEO Huynh Du An. “Key findings included that a lower price of entry was intriguing to consumers, and they appreciated support plans the subscription provides.”

While the leasing strategy has benefits, it does carry risks, said Michael Vousden, an automotive analyst at GlobalData, a London-based data analytics company.

“Obviously, these EVs have big batteries and are expensive to make,” Vousden said. “They are expensive cars, so if you can bring that purchase price down … by having this lease deal, then maybe it makes sense.”

Still, it could be a hard sell.

“I think the problem with these leases is they are just going to butt up against people’s desire to not have two separate payments for one vehicle,” Vousden said. “The consumer is going to see big fat car payments every month and now an additional battery payment.”

Canadian pricing for the VF8 and VF9 has yet to be released. In the United States, however, the midsize VF8 will start at US$41,000, while the full-size, three-row VF9 will be priced from US$56,000.

VinFast is “actively engaged” with Ottawa over proposed changes to its federal EV rebate program. The government is expected to expand the list of eligible zero-emission vehicles — a move VinFast hopes will extend eligibility to its products.

Under the current iZEV program, the rebate of up to $5,000 applies to EVs with a base-price threshold ranging from $45,000 to $60,000. 

However, VinFast’s sales strategy does not “solely hinge on federal incentives,” said Du An. “Incentives may support a certain number of consumers, but VinFast will offer a market-leading range of products to customers.”

LEASE AKIN TO PUMP PRICE

Under the leasing program, announced for the United States in January, VinFast will rent the battery packs to customers, rather than include its cost in the original price. While pricing is not yet available, VinFast Global CEO Le Thi Thu Thuy has said the monthly battery lease payment would be similar to most motorists’ monthly gas expenses.

VinFast will also replace the battery free of charge if the capacity dips below 70 per cent.

By separating the cost of the battery from the purchase price of the vehicle, the company said, it will be able to price its EVs closer to an equivalent internal-combustion-engine offering. VinFast also hopes to entice customers by removing the worry about the replacement costs of the battery pack if they own the vehicle for a long time.

As for concerns that a leased battery pack would hurt residual value, Du An said: “On the contrary, a regular EV sold with batteries will have lower residual value because battery depreciation will have to be calculated, while the cost of the battery accounts for a large part of an EV’s value. Thus, customers tend to suffer more losses.

“VinFast ensures that the value of the battery remains unchanged because old batteries with charging capacity lower than 70 per cent will be replaced free of charge.”

VinFast, he said, is planning a certified-pre-owned program “so that customers will see the preeminence of our battery subscription program.”

RECYCLING ADVANTAGE

The automaker benefits by maintaining ownership of the lithium-ion battery packs, said Vousden, adding that a full battery system will likely account for one third to 40 per cent of the cost of an EV.

“If you’re VinFast and you’re leasing the battery to someone, you still own that battery,” he said. “So, the value of that battery, rather than getting squirreled off into the used market, and then maybe 20 years down the line someone brings that vehicle in for recycling and gets the recycling value of that battery in their pocket, you keep the recycling value of that battery.”

This also offers a marketing opportunity, giving buyers peace of mind that their vehicle’s battery will be properly recycled and won’t go to waste or end up in a landfill, Vousden said.

“You can be absolutely sure they are going to be using that as a selling point,” he said.

VinFast Canada is expected to begin direct-to-consumer sales of its VF8 and VF9 in the second quarter of this year.

Meanwhile, storefronts in two Toronto-area malls as well as outlets in Vancouver and Montreal are expected to open in the next few months, said John Lindo, a VinFast spokesman. The automaker has said it plans to open 38 retail and service locations across Canada by the end of 2023.