Vietnam’s Vinfast started production at a $500 million electric vehicle factory in the southern Indian state of Tamil Nadu on Monday as part of a planned $2 billion investment in India and a wider expansion in Asia.
Thoothukudi’s factory will initially build 50,000 electric vehicles a year with 150,000 space. Given its proximity to one of India’s most industrialized states, Vinfast hopes it will become a hub for future exports to the region. It says the factory will create more than 3,000 local jobs.
The Vietnamese company said it conducted 15 locations in six Indian states before choosing Tamil Nadu. Tamil Nadu Industry Minister TRB Raaja said it is the center of India’s automotive industry with strong manufacturing, skilled workers, good infrastructure and reliable supply chain.
“This investment will lead to a completely new industrial cluster in South Tamil Nadu, and more clusters are needed by India as a global manufacturing hub,” he said.
Vinfast Asia CEO Pham Sanh Chau said the company has a desire to export cars in the region and hopes to turn the new plant into an export hub.
The new factory could also mark the beginning of an effort to bring the rest of the Vingroup Empire to India. The sprawling conglomerate founded by Vietnam’s wealthiest man Pham Nhat Vuong started with an instant noodle company in Ukraine in the 1990s and now covers real estate, hospitals, schools and more.
Joe said Tamil Nadu Chief Minister MK Stalin invited the company to “massive investment” in areas such as green energy, smart cities and tourism, and said the Chief Minister “promises him that he will give us all the necessary things to make us move the entire ecosystem here.”
Asia’s strategic hub
Vinfast’s attempts to enter India reflect a broad shift in strategy.
The company is increasingly focusing on the Asian market after striving to gain the appeal of the United States and Europe. Last year, it broke the ground at a $200 million electric vehicle assembly plant in Indonesia, planning to build 50,000 cars a year. It is also expanding in Thailand and the Philippines.
Vinfast sold nearly 97,000 cars in 2024. That’s three times the sales of the previous year, but only about 10% of sales are outside Vietnam. When it looks to Asia, it hopes that India’s factories will be the basis for exports to South Asian countries such as Nepal and Sri Lanka, as well as countries in the Middle East and Africa.
India is the world’s third largest automobile market with the number of vehicles sold in the world. It proposes an attractive combination: a fast-growing economy, adoption of electric vehicles, supportive government policies, and a rare market where players have not yet fully dominated EV sales.
“This is a market in the world where no automaker can ignore,” said Ishan Raghav, executive editor of Indian auto magazine Autox.
India’s growing electric vehicle market
India’s EV growth is led by two-wheelers and tricycles, accounting for 86% of over 6 million electric vehicles last year.
Four-wheel passenger electric vehicles accounted for only 2.5% of all car sales in India last year, but they have been soaring, with sales in 2024 rising to over 110,000 from 1,841 in 2019. The government aims to make EVS accounts account one-third of all bus sales by 2030.
Energy expert Charith Konda said: “The story of electric vehicles has begun (India). He said the new car “looks great on the road”, better batteries, fast charging and longer driving range are driving the industry’s rapid growth.
The shift to electric vehicles is primarily powered by Indian automakers, but Vinfast plans to break into the market later this year with its VF6 and VF7 SUV models designed for India.
Vinfast Asia CEO Chau added that the company chose the VF7 launch of India, which is like the model introduced by the U.S., Canada, the EU or Southeast Asia, positioning itself as a premium global brand while maintaining affordable prices.
Can Vinfast succeed in a place where electric cars in China are staggering?
Chinese electric car brands, which dominate countries such as Thailand and Brazil, find India more challenging.
India has prevented companies like Byd from building their own factories after clashes with China in 2020. Then some turn to partnerships. SAIC in China is the owner of MG Motor, joining with the Indian JSW Group. Their MG Windsor is a five-seater that sold 30,000 units in just nine months, reducing the Tata Motors’ 70% EV market share to about 50%.
Tata is the first local automaker to have mass-market consumers with electric vehicles. Its electric Nexon (a small SUV) was launched in 2020, becoming India’s first major EV car to succeed.
Vinfast’s lack of geopolitical baggage from its larger Chinese competitors will also benefit from incentives such as lower land prices and tax relief for local construction in India. This is part of India’s policy to block import taxes to help encourage local manufacturing and create more jobs.
Promoting onshore manufacturing is also a problem Tesla, launched Y model in India last month For nearly $80,000, the price in the United States that does not have a federal tax credit is about $44,990.
“India’s position is very clear. We don’t want to import manufactured cars, even Teslas. Whether it’s Tesla or Chinese cars, they will be taxed heavily.”
Hard fighting in a tough market
The road ahead is still daunting. The Indian electric vehicle market (EV Market) is packed with proficient players such as Tata Motors and Mahindra, which occupy the cheaper territory, while luxury brands such as Hyundai Motor, MG Motors and Mercedes-Benz and Audi compete at high prices.
Indians tend to buy electric cars as the second car to drive in cities, because the infrastructure to charge elsewhere may not be relied on. Vivek Gulia, co-founder of JMK Research, said Vinfast will need to win India’s cost-sensitive and conservative drivers and enjoy a reputation for quality batteries and service while keeping prices low.
“Initially, people would worry.”
Vinfast said it plans to set up showrooms and service centers in India, work with local companies for charging and repairs, and cut costs by recycling batteries and making key parts, including powertrains and battery packs in the country.
Chau added that after the investment from client clinics and top Vietnamese engineers in September 2024, the company upgraded its feature list to better meet Indian customer expectations.
Ratio will be the key. Vinfast has signed an agreement to establish 32 dealers in 27 Indian cities. Hyundai has 1,300 places where Indians buy cars. Building a brand in India takes time – for example, Hiundai has taken it off for decades, helped by early recognition from Bollywood superstar Shah Rukh Khan.
If Vinfast can get pricing correctly and win the trust of customers, then Vinfast can succeed, Gulia said: “Then they can actually do a good job.”
