Good day, and welcome to the VinFast Auto Limited 3Q 2023 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to [ Carol Wynn ], Head of Investor Relations. You may begin.

Good morning. Before I turn it over to Thuy, let me remind you that some of the statements on this call include forward-looking statements under federal securities law. These include, without limitation, statements regarding the future financial performance of the company, delivery volumes, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives and other future events. These statements are based on the predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC. In addition, management will make reference to non-GAAP financial measures during this call. A discussion on why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this morning as well as in the Investor Deck. With that, I'd like to turn it over to Madam Thuy.

Thank you, [ Carol ]. Welcome, everyone, to VinFast Auto's Third Quarter 2023 Earnings Call. Thank you for joining us. Firstly, I would like to talk about our strategic priorities. We are excited to update you on our accomplishments over the last quarter. But first, I want to reiterate our unwavering focus on our strategic priorities to strengthen and grow the business which are largely in line with those shared recently for Q2. Priority #1 is global growth. We continue to be pleased at the response and interest our vehicles have recieved across our global markets especially amongst consumer [indiscernible]. We remain focused on shipping the VF 9 to North America by the end of the year as well as targeting post delivery of the new VF 6 later this year in Vietnam and the VF 7 and VF 3 in 2024. Priority #2 is the expansion of our global footprint. We are continuing to build out our production probability in North Carolina, and the facility will best position us to serve the North American main markets. We are progressing in our evaluation of up to 50 global and other markets. In the future, we have identified having high potential [ for ] engage quality distributors. [indiscernible]. And Priority #3 is our continued focus on building automotive technology through our in-house R&D and external partnerships, making our vehicles smarter and more reliable to our customers. Next, I would like to discuss the key milestones achieved in Q3, a few highlights for our third quarter. In September, VinFast officially introduced a B-Segment, EV model, the VF 6 in Vietnam. The affordable VF 6 is designed for families by Torino design equipped with a wide range of smart features and ADAS level 2 probabilities. The model is also [indiscernible] which are expected that the [ actively ] driving range of 248 miles and 237 miles respectably, and a charge time of less than 25 minutes. VinFast is [ planning for integration ] for the VF 6 in Vietnam later this month. We are pleased that the new model has already attracted significant interest with meaningful interactions on Facebook and TikTok. We are also making strides in global expansion. As we unveiled basically for Q2, VinFast is establishing broad distribution channels, leveraging local networks and expertise of third-party dealerships and distribution to increase coverage in our growing list of [indiscernible]. We aim for our vehicles to be present in up to 50 markets and countries globally by the end of 2024. And in the U.S specifically, this approach provides seamless consumer access is especially more [ safe ] as compared to your pure direct to consumer model. In fact, we have signed 27 letter inches with well-known dealership groups, covering more than 100 open dealership points across the U.S., including but not limited to Florida, Texas, North Carolina, Virginia, Louisiana New Jersey and so on. Leveraging local distributors in many of our key markets, makes for a capitalized expansion model that will allow VinFast to be more efficient about cost and use of capital. We recently announced plans to commence delivery of EV in Indonesia by 2024, identifying the country as a key market for the establishment of manufacturing facilities of our EV and battery. In addition to Indonesia, we have identified India as another market where we intend to grow our facility to begin production in 2026. Each facility has planned total capacity of up to 50,000 tons to begin in Phase 1 and an estimated total CapEx of $150 million to $200 million. We expect to participate in the tremendous potential brought by the increased EV production in both Indonesia and India, while EV penetration is currently still very low. We look forward to giving you an update on the international expansion of our manufacturing facilities which will come back our existing facility in [ Hyde Park ] and our factory in North Carolina once production commences. Also in Q3, we have received $955 million in loans from vingroup and $291 million in grants from our chairman, as well as the $240 million from our deSPAC transaction and the strategic investment by Gotion. We continue our expansion adding over 10,000 new third-party channel employees in North America and gaining access to about 500,000 channel [indiscernible] through [ box network ] in preparation for vehicles delivery in the EU later this year. And we are concluding discussions with our key channel partners as well globally. [ Anyway ], we continue to expand our global footprint by the end of Q3, VinFast had 247 showrooms and workshops in the quareter and 126 showrooms globally for EVs. [ Asset ] [indiscernible] [ handle ] this past quarter. Finally looking forward, we remain focused on executing again our strategic priorities to strengthen and grow the business. We will continue to expand our global footprint to manufacturing capability in key markets such as Indonesia and India, while we expect high EV demand growth. We will build and develop our business model as we expand our distribution network and enter the market to [indiscernible] dealership and distribution. In addition, we are making a significant effort to reduce our CapEx. We estimate our CapEx spending for global manufacturing to decrease by about $400 million in 2024 and 2025. This optimization of our manufacturing CapEx will allow us to expand into Indonesia and India, while making the overall spend lower than our prior assets. And finally, we continue to maintain and promote our Best in class after sales policy in the market as we expand our global markets. I would like now to hand over to David for his discuss our financial performance for the quarter.

Thank you, Madam Thuy and hello everyone again. So firstly, let me take you through the third quarter results and the numbers. We delivered 10,027 EVs and 28,230 E-Scooters for the quarter. VF e34 had recently launched the 5 main drivers in Q3 and significant increase in e-solutions largely due to EV sales here in Vietnam. We reported revenue of $343 million, representing an increase of 160% from the third quarter of [ '22 ] and an increase of 4% from the second quarter of 2023. Total revenues are primarily comprised of revenue from EV sales including encouraging uptick in Canada just this last month. Gross margin improved 4% quarter-over-quarter due to lower sales to the first customers who were eligible for incentives and also better economies of scale resulting from an increase in sales of E-scooters. Operating expenses declined quarter-quarter by 7%. This was mainly attributed to the decrease in R&D costs paid to experienced suppliers and other costs related to our R&D activities with EVs as we brought 3 EV models into commercial production in the last four quarters. While SG&A increased by 43% year-over-year, it remained flat quarter over quarter. CapEx in [indiscernible] declined by 47% in Q3 compared to Q2 and by 40% compared to the year prior. So we reduced our spending on tools and equipment for new vehicle programs and front-loaded back end purchases in connection with battery use. Let me give you some guidance now on the upcoming quarter. So moving to our outlook for the final quarter this year. We are reaffirming our target of 40,000 to 50,000 [ indiscernible ] for this year of 2023. We expect about $400 million in savings including manufacturing CapEx including [indiscernible] be redirect to manufacturing expansion as outlined earlier in [ 2023 ]. We also remain on track to ship, VF 9 to North America, and deliver the VF 6 in Vietnam by the end of this year, and we are very excited for [ indiscernible ] deliver on VF 7 and VF 3 beginning in Q4. We will continue to look for opportunities to strengthen our balance sheet on top of [indiscernible] deSPAC merger, negotiate strategic investment and funding support from Chairman and Vingroup. With that, I'll hand back to you Madam Thuy for closing remarks and the speaker to hold our Q&A session.

In conclusion, VinFast has made a considerable advancement for this quarter and is committed to establishing and expanding its presence in key markets and maintaining strong positioning as we advance the company's mission of creating a greener future for everyone. Thank you, back to the operator.

[Operator Instructions] Our first question comes from [ Brian Dodson ] with [ Chardan Capital Markets ].

So just a quick question on your 2023 delivery target of 40,000 to 50,000 vehicles. Could you perhaps break up the composition of that target in terms of what types of vehicles you expect to be delivered?

Yes. So let me -- Well, first of all, I guess, the targets will be increased in Q4 compared to the prior ones that we delivered and we're comfortable that we'll be able to deliver that uptick in volumes seasonally in Vietnam. The increase in vehicle sales ahead of the lunar new year, which will be a beneficiary of, in particular, with the launch of the VF 6 and the VF 5. Now the domestic models that we are expecting to be most popular in Q4 are the VF e34, the VF 5, and VF 6 while also we'll be making deliveries on both the retail basis and the ET customers of the VF 8 but in relatively smaller quantities. We don't give a breakdown of model by model, deliveries, projections. So that's as much as I can say.

Yes, very good. Your sales growth in North America, you said, was spurred by interest in Canada. Do you think you could elaborate on what's driving that interest? And how you expect those trends to evolve over the next few quarters?

Sorry, what's the question? [ indiscernible ] Canada?

Yes. You called out strong interest in Canada when talking about North America. And I was just curious to see what types of trends you are seeing in that region and how you might expect those trends to evolve over the next, call it, year or so?

We continue -- I mean, we have pretty much -- with so more than the number of vehicles that we receive in Canada. The lack of interest in Canada is very, very strong, and we expect that with the addition of VF 9, there will be a growing demand from Canada. Within Canada, the Quebec region in particular, attracted a lot interest of vehicles.

So Yes. I think it's just the overall receptivity towards electric legal reduction in Canada. I think there's probably a structural lack of competition and choice for Canadian consumers relative to potentially other markets, in particular in the U.S. Obviously, there wouldn't be a national deviation or an affinity for the Tesla brand in Canada compared to the U.S. And I think that EVs as are more accepted to a new emerging Asian brand in EV space over this contributing to -- this activity to VinFast and we're very encouraged by it. And as [indiscernible] the uptick in North American sales was driven by the increase in sales in Canada in the [indiscernible].

Yes. That's very helpful. And then, I guess, keeping on the trend of global markets, you said that you want your vehicles to be available in 50 global markets by the end of '24. By vehicles, do you mean scooters and cars? Or well, could you break that down perhaps between scooters and cars? Or is it both?

I think -- I mean, we were referring to mostly the EVs, but obviously, there's certain markets like Indonesia, India, where 2-wheel penetration is really significant. We will have to be more [indiscernible] as well. But when I mentioned up to 50 global markets and countries, by the end of 2024 we were referring to EVs.

Great. And then just finally, talking about global expansion. In the United States, you said that you have LOIs from 27 U.S. dealers. What does the timetable looks like between LOI and getting something on the showroom floor?

We happen to have some of the dealership open by [ the end of the year ].

Thank you. Our next question comes from [ Andreas Shepherd ] with [ Cantor Fitzgerald ].

I wanted just to clarify, I think, on the first question. So you reaffirmed your guidance for the rest of the year. By my calculations, you would need a bit of a steep increase in Q4. So just can you remind us what are the key drivers there? And what's really behind your conviction of meeting that delivery guidance?

The -- as I reiterated before the seasonal uptick in local market, Viatnamese market primarily demand for vehicles in the fourth quarter, it is notable. We expect that to drive the bulk of the uptick in volumes. We have also continued outstanding contracts with a B2B partner, GSM for the delivery of our e-taxi models that will be in a position to deliver. We have a new VF 6 model coming on to market and that's available for reservation from October 20th here in Vietnam and that we'll be delivering this quarter as well. On top of that, we have deliveries into Europe, our first VF deliveries into Europe and the deliveries of VF 8s and our first VF 9 deliveries into the North American market also. So overall, still, reiterating the same guidance and understanding that it is an uptick in volume relative to the prior two quarters.

Got it. That's super helpful. And maybe as a follow-up. What is the expectation around gross margins. Do you expect those to gradually continue to improve quarter-over-quarter? Is there a time period perhaps by which you are maybe expecting positive gross margins?

Yes. So that's a great question. The improvement is quarter-over-quarter is favorable. We are expecting that trend to continue. I think one thing that should be noted is that when we launched a new vehicle model to [ SLP ]. This quarter, the VF 5 in particular was [ SLP ] to begin with. It does take that sometimes optimize the production process and the efficiency of inventory suppliers. So we expect that operating contribution margin from that vehicle model to improve in the next quarter. And overall, we expect the trend, we are very focused on optimizing operations and manufacturing, obviously, scaling all the vehicle models to improve efficiency. And we have indicated in the past that we can see ourselves getting to breakeven profitability in the space of 2 years. So we still very much have that vision in mind and expect to be able to deliver on that even ahead of time.

And maybe just one last, I'd just squeeze it in. You mentioned the plans for expansion into India and Indonesia, I think you say in the announcement today that each of these facilities will have the capacity for upto 50,000 vehicles. I know you're not necessarily guiding next year deliveries. But I'm just curious, how should we be thinking about the delivery numbers for next year and onwards? Do you expect a significant ramp-up in that delivery given the new expansion? Or just any guidance there would be helpful.

Yes, thanks. There's obviously -- we're not providing any guidance for next year, but we're not creating the capacity for the reason we do anticipate a steep ramp up in our volumes next year. Some of the initiatives that Madam Thuy already mentioned, the key target markets in Indonesia and India and the production of CKD production facilities there and also the dealership of the network sign-up in both the U.S. and the up to 50 markets is on top of that, that we're looking to expand. All of those will drive volume in addition to strong growth domestically here in Vietnam. I think it's probably worth noting as well that from a [indiscernible], we do have up to 300,000 units of capacity that we can manufacture here in Vietnam and so we'll be looking to utilize all of that capacity over the course of the next few years. The manufacturer of CKD vehicles, obviously, is a combination of manufacturing many of the parts and the structure of the vehicle here in Vietnam before we ship it to the CKD assembly point. So it is a hybrid manufacturing approach.

Our next question comes from [ Adam Hornby ] with [ DLD Asset Management ].

I'm Having a little bit of trouble hearing you. So apologies if this has been addressed already, but could you tell us of the deliveries in the quarter, how many went to Green SM Taxi?

In Q3, about 70% went to GSM vehicles brought to Vietnam.

And would you be able to tell me if you have a production number or a delivery number that you know you need to hit in order to get to cash flow breakeven?

As indicated last time, I think the full [ fund ] for the market is about 200,000 and 250,000 vehicles per year. Because our cost rate is lower than other OEMs, we expect to allow 150,000 people [indiscernible]. Can you hear me? Is it better?

There are no further questions on the phone. And the next question is from the webcast. How many cars were sold to GSM and to the U.S. market in Q3 2023 and the first 9 months of 2023? Could you please break down the revenue by [ VN ] and U.S. markets?

Yes. Cumulatively, the number that we have sold to GSM is -- the new cumulative number is [ 6,300 -- 12,000]. Does that question [ indiscernible ]?

Yes. The next question is, what is the payment scheme for GSM? How much of the first 9 months revenue was from GSM and the percent of cash that was collected?

So the payment terms for GSM contracts are standard [ indiscernible ] terms, and we've collected -- we have 60 to 90 day payment terms on those contracts. So we created about -- the revenue from GSM, 9 months to date is approximately $380 million.

David. The next question is, how are you going to manage only $131 million cash on hand? Are you going to raise more money and how?

Yes. So I think we've been pretty clear about this, [ when we have all been going ] commitments from vingroup and Chairman for the next 6 months of beyond up to [ $1 billion ] there. And currently,, we have been proactive in capital markets, especially now that we are listed and looking at opportunities forth company to raise cash and to monetize the company's share price in addition to other avenues and other instruments that we're considering.

The next question is, can you please update on the development time line of the U.S. factory?

We expect the exit lease to [ per se ] in the middle of 2025.

The next question is, why does VF plan to build additional CKD factory in India while the [ VN ] factory is currently running at a lower utilization rate and VF has recently announced the plan in Indonesia?

Yes. I think the main driver is Obviously, the [indiscernible] problem from the government or [indiscernible] in this country that allows to be more competitive to the market. And then we have access to the customer, faster access to the customers. And we also expect to [indiscernible] low EV adoption in those markets. So we expect to be able to participate in the [indiscernible] in those markets. In the past weeks, we've been looking at our CapEx plan, and we have managed to save about $400 million from the industy CapEx plan so that we can invest in [indiscernible] plants in Indonesia and India. But like David said before, in the coming 2 years, we still expect most of our deliveries to come out from our high [indiscernible] plant.

The next question is regarding to your financials. Why was your 3Q revenue slightly higher after a significant increase in 2Q?

Yes. So 2Q did increase for a couple of reasons. It was [ off to ] low rates in Q1, which is low season for car-selling, due to in Germany -- the [ new year ] holiday here in Vietnam. And then in Q3, we delivered increasing numbers of new models such as the VF 5 and the VF 9 in Q2. So yes, I think just comparing that quarter-over-quarter, the combination of starting off a low base and in fact, by delivering new models meant that the quarter-over-quarter Q3 to Q2 increase in revenue was only modest. And as I said, we expect an update in revenue from increased vehicle sales in Q4 seasonally higher.

How should we think about your debt profile?

So we obviously maintain a diversified balance sheet of debt domestic, international bank loans, syndicated loans and domestic bonds. We have the exception -- with the exception of our short-term borrowings, our debt [ increased ] on a [indiscernible] based over the periods of 1 to 3, no more than 5 years. And there are all at a number of international and diversity of international banks which we are -- from whom we are borrowing money.

The next question is related to the VF 6. What are the key selling points for this new model?

Well, the VF 6 is a very key vehicle model not just for us here in Vietnam. But internationally, we think as a B-Segment SUV is oriented to their families, [indiscernible] bi-passenger size, designed beautifully by a premier designer in Italy and equipped with a wide range of smart drive features and ADAS level 2. So battery size and battery composition is almost 60 kilo watt battery of LFP type and packed by [ BDS ] here in Vietnam and [ indiscernible ] by our [ factory ] partner. It's got a very strong range and excellent charging capabilities. And obviously, then most importantly, it's priced very, very reasonably, starting at equivalent of $28,000 for customers here in Vietnam. So not just here in Vietnam, but when we export it internationally, we expect it to compete in that very high volume mass market gradient segments that will enable us to deliver a substantial volume.

Thank you, David. The next question is related to Indonesia. Can you please elaborate on your distribution strategy for the Indonesia market? If it's with a local partner, who is the partner? And are there any incentives granted by the government during the construction of the CKD plant?

We are still in discussion with both the government as well as local partners, so let us come back with more information in the future.

The next question is back on our CapEx guidance. Could you please elaborate more on the changes in CapEx guidance from 2024 to 2025. Is it due to extending the CapEx disbursement timeline or due to changes in plans for the U.S. factory?

We didn't like being [indiscernible] changes to the plan at the timeline, we just optimize. If anything, we actually added more items to the manufacturing facility in the U.S. And we optimize locally before manufacturing CapEx in order to divide to the facilities.

I would just add one further clarification there on the CapEx. Saying that's a multiyear CapEx segment that we're using to reinvest the proceeds into our planned investments in Indonesia and India. So it's not a 1-year reduction of $400 million in CapEx.

How would the expansion of the third-party dealership affect your balance sheet and P&L?

Yes, I think it's going to be very much more efficient. And obviously, some of our CapEx optimization is driven by rolling our distribution channels to dealerships and partnerships rather than directly investing in owned and operated showrooms that would be the principal [indiscernible] difference in balance sheet. And then obviously, from a distribution perspective and the visibility of sales perspective, we will be able to have a greater predictability and visibility over the upcoming quarter and half year sales to deliver into commitments from [ data ]. So I think it will provide us good visibility on upcoming quarters and reduction in volatility of order through those sales.

And the important question is the speed to market as well. I believe the partnerships with the dealerships and distributors allow us to expand on our [ pattern ] and additionally [indiscernible].

The next question is, can you please share more information about your production cost structure?

Well, I think we've been clear that we have cost structure advantages being here in Vietnam, it's a very efficient place to manufacture, we are to export into the markets that we're looking to target. We have significant label cost advantages, we have great foreign trade agreements that we can export under that are very efficient to [ high- end ] markets, the U.S., the Europe. We have talented technology and R&D staff that are highly educated here in Vietnam. We have a scaled manufacturing facility in Vietnam that is capable of producing very, very high volume of vehicles and fully integrated supplier part that allows us to operate very efficiently from a supplier perspective. So we have a lot of advantages. We obviously don't break those out to the level of detail that [ which ] is get pretty sensitivity by all automotive manufacturers, but we're very optimistic about our opportunity to profitably and competitively use vehicles here in Vietnam for export.

The next question is related to the registration of shares. Why did the company register these shares so soon after the listing over what time period will these shares be sold by the two key shareholders?

Let me clarify this point. So we registered [ indiscernible ] for 7 billion shares, but not all of them are being sold to the market, only about over 46 million shares will be added to the free flow of the market. The intention is to, obviously, number 1 is to increase the liquidity, increase the free flow in the market. So we can have more participation of investors in the market and to increase that to rate [indiscernible]. There's no particular period of time when we want to sell the shareholders would sell the shares. And the shareholders have not started selling the share yet. Maybe another point, another very important point is this 46 million were filtered by VinFast. So VinFast didn't sell the shares, 100% of the net proceeds from selling this share will go into VinFast for free to continue growing VinFast.

The next question is, are you able to share the preliminary guidance for 2024 and 2025 R&D expenses. And how is it versus the first 9 months of this year?

So I think, again, as we have been developing a full portfolio of vehicles in parallel, the R&D spend had a high run rate through 2022 and 2023. We will be finalizing the delivery of those full portfolio vehicle models. We've already identified the start production of the VF 6. We have the VF 9 to be delivered to the U.S., we have VF 7 and VF 3 in 2024. And we have some work to do around the delivery of right-hand drive vehicles. But all this is expected to be trending down from an R&D perspective significantly from the middle of next year. So that, coupled with the lower CapEx that we're optimizing. I think the free cash flow will come much sooner and much more positive to the firm than previously anticipated.

That wraps up all the questions on the phone and through our webcast.

Please can I just have 1 minute. I mean there have been a lot of questions about GSM, so if possible, can I just say a few things about GSM. We think that GSM is a positively good business and it has probably about 70% is the taxi business and the other 30% is our vehicle leasing business to the advertising company, to corporate. So where many other [indiscernible]. And back to the taxi business, GSM is very well in demand. Starting just over -- just not even 500 but as of last week, I think GSM [indiscernible] and we just started delivering the E-scooters to GSM, but they already have a million E-scooter bikes in demand. GSM now is the #2 taxi company, in Vietnam already and very soon, it's going to be number #1 taxi company in Vietnam. GSM will expand into other markets as well beyond Vietnam together with VinFast like in Indonesia, India, even in the U. S. So from VinFast perspective, we think that GSM is a very good business partner and it's going to compliment very well as VinFast grows in the future. So I just wanted to say a few words about GSM because there has been an overwhelming number of questions about GSM. Thank you.

That wraps up all the questions we have for today's call. If anything comes up, please do reach out to our IR e-mail address, and we get some things set up and answer your questions accordingly.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.