VinFast Auto Q1 2024 Earnings Call Transcript

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Provided by Quartr
April 17, 2024

There are 7 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to Ventas Auto's First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Nhi Wen.

Operator

Please begin.

Speaker 1

Thank you, operator, and good morning to everyone. My name is Nhi Wen, IR Manager at Bintas. Thank you for joining us for our 2024 Q1 earnings conference. Joining me on the call today are Chairwoman of the Board, Madam Tieu Le and our CFO, Ms. Anh Nguyen.

Speaker 1

We will start the call with Q1 performance update and present our outlook for the year. We will reference a presentation today, which is accessible on the IR website. After management presentation, we will have 30 minutes for Q and A. Before I turn it over to Madame Fillet, 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 and operating outlook, guidance, as well as macroeconomic, industry trends, company initiatives and other future events.

Speaker 1

These statements are based on the predictions and expectations as of today. 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 during this call, a discussion why we use non GAAP and information regarding the reconciliation of our non GAAP versus GAAP is available on the press release that we issued this morning or you can find it in the final page of our presentation. With that said, now I would like to invite Madam Pile to start with management's presentation.

Speaker 1

Thank you, Mi.

Speaker 2

I'd like to start by addressing the broader EV industry context. It is important to acknowledge that macroeconomic and geopolitical uncertainties continue to impact businesses and consumers globally. As a global company, we operate in a diverse range of strategic markets including North America, Europe, Middle East, Southeast Asia and South Asia. While we are currently observing certain level of weaknesses in some of our markets, we view this as temporary challenges. Our confidence in the EV industry's medium and long term prospects remains strong.

Speaker 2

This confidence stems from several factors, including supportive government initiatives and the EV market's anticipated transition from early to mass adoption and the exponential growth projected in ex China markets. I also would like to reemphasize our focus on EV over plug in hybrid of gasoline cars. This strategy allows us to leverage our low cost manufacturing base, mature supply chain, share platform and to stay true to our mission to play an impactful role in the push for transition to green mobility and carbon neutrality. EV is a better choice to make it happen. Now let's turn to our progress in the Q1.

Speaker 2

We enter a number of new markets and increased vehicle deliveries across our global markets. We delivered 9,689 vehicles during the Q1, representing a year over year increase of 4 44%. While the majority of our sales this quarter was domestic, we saw an uptick in the U. S. Spurred by a special leasing deal of $2.49 per month on VF8.

Speaker 2

We remain confident of our full year delivery target of 100,000 vehicles supported by the robust ramp up of showrooms and the availability of new models targeting a wider customer base in multiple new markets during the second half of this year. For the Q1, our best selling models were the A segment VF5, our current most affordable option that was launched last year, which accounted for about half of our deliveries, followed by the VF8 and the VF6. Our VF6 model has been well received in the local market since its launch in late December last year and we are excited for the addition of this model to overseas markets where options for affordable and good quality EVs are still limited. Now I would like to share some updates on 3 fronts dealership distribution, new markets engines and new product deliveries. Since we pivoted to the hybrid distribution strategy in the Q4 of 2023, we have made steady progress in developing our dealership network.

Speaker 2

Our capital light model is steadily accelerating our global go to market strategy and will support both our sales growth and cash position. At the end of the Q1, in North America, our active distribution network includes 15 WinFast owned showrooms in California, 2 showrooms owned by Lease and CarStore USA in North Carolina and Kansas and other VinFast owned showroom in Canada. In the U. S. Alone, we completed the signing of another 10 dealership agreements besides the pre existing 6 agreements.

Speaker 2

We are working to continue growing our dealership coverage in this division and we'll share more progress in our future announcements. We are already seeing our hybrid distribution strategy deliver promising results in the U. S. With sales starting to be generated from our dealers. We have also seen promising growth in the U.

Speaker 2

S. Markets following the launch of VF8 and its continuous improvements and software updates. We expect further growth in 2024 as the VS9 will be available for delivery in the U. S. Market starting in late Q2, early Q3 and the VS7 after that.

Speaker 2

Notably, we saw a pickup in consumer interest on the back of attractive lease offers amidst macroeconomic headwinds confirming our belief in consumers demand for EV in this market. Our dealers have been receiving positive feedback from U. S. Customers. Most were surprised how well equipped the VF8 is as the first product from a new EV brand.

Speaker 2

Customers have particularly praised the smooth acceleration spacious interior with comfortable seat and well thought out layout. In addition to the U. S, Canadian and European markets, we are also exploring dealership partnership with other parts of the world while the EV revolution is still at early stage like in South and Southeast Asia. At the same time capturing the opportunities in new markets such as the Middle East and Africa. As discussed in the last quarter, Asia will remain one of our key strategic markets.

Speaker 2

We believe that it represents the future of the automotive and electric vehicle markets driven by demographics and government drive and incentive for EV adoption. Let's take a closer look at our performance in 3 key markets in Asia. We will start with Thailand. Last month, we announced our official launch in Thailand, one of Southeast Asia's most vibrant electric vehicle markets with a relatively established charging stations infrastructure out of ASEAN countries. To showcase our commitment to sustainable mobility, we unveiled a diverse range of green solutions during the Bangkok International Motor Show and signed LOI with 15 initial dealers in Thailand.

Speaker 2

Many of those are already discussing with us regarding optimal showroom locations. At the event, we display right hand drive versions of 6 of our models, including the VF5, VF34, VF6, VF7, VF8 and VF9 along with our complete lineup of electric scooters and our electric pickup concept, the VF White. Now, I would like to turn to India. India's rapidly growing market has great potential and is a key component of our global multifaceted expansion strategy. During February, we broke ground on our EV manufacturing facility in the state of Tamil Nadu and by the middle of March, construction was already underway.

Speaker 2

We take a realistic capital allocation approach with the initial CKD phase of 50,000 EVs per year and would be able to rapidly increase capacity as conditions require. And finally, let's turn to Indonesia. Following our successful debut at the 2020 4 Indonesia International Motor Show in February, we started opening orders for the VF E34 in Indonesia last month, marking another milestone in our expansion in Southeast Asia. With the introduction of this model at a very competitive price, our aim is to support Indonesian consumer at the impact on the journey to a sustainable transportation future. Also, the 1st dealer store was opened in Greater Jakarta, which will start selling the VF via E34.

Speaker 2

During 2024, we plan to expand our EV distribution network across major cities in Indonesia. With regards to our expanding product lineup, the much awaited VF3 is under development, well on track for launch locally in Vietnam within 2024 and then overseas from 2025 onwards. VF White, our highly anticipated pickup truck is at early stage of study and we plan to share a target launch soon. Other milestones achieved in the Q1 of 2024 include closing our merger with VINES Energy Solutions. This is an important step in completing VinFast integrated supply chain and will have to build a competitive advantage for us in the global EV market.

Speaker 2

We started building our own charging network in Vietnam that is exclusive to VinFast in addition to working with partners overseas allowing WinFast access to over 850,000 charge points globally. Our founder recently established an independent charging infrastructure company, V Green, to focus on developing charging stations. This will aid VinFast global expansion, especially in markets where infrastructure is still at an early stage. Wegreen shall act as a partner of VinFast and will provide charging access to VinFast EVs in many markets, which shall translate into reduction in CapEx for VinFast, having VinFast stay focused on our EV businesses growth. Looking ahead, we remain committed to executing our strategic priorities to strengthen and grow our business globally.

Speaker 2

With regards to our product lineup, our focus during 2024 includes first delivering the new highly expected and very affordable VF3 model in the domestic market. Secondly, delivering the new product to VF9, VF9, VF7 in North America. And finally, completing our full EV lineup for global market in both left hand drive and right hand drive versions along with the worldwide launch of all models. With regards to our global footprint, we expect to start delivering our EVs in markets with high EV demand growth including key focus on Indonesia, Thailand, the Philippines and India this year. Our team in this market are proactively working with dealers to accelerate the readiness of their showrooms.

Speaker 2

Our distribution partners in other parts of the world are also progressing to the next phase of discussion needed to import EVs and commence local sales. In closing, we expect the majority of sales to come in in the second half of the year with the first half dedicated to setting up the foundation including production ramp up, new product launch and finalizing dealership agreements. With that, I would like to hand over to Lanang, our CFO to present our financial results for the quarter.

Speaker 3

Thank you, Madam Cui, and hello, everyone. First, I would like to address a housekeeping item. As mentioned in the previous call, following the completed acquisition of Vinesse in January, a significant step towards completing VinFast fully increased production chain, we consolidated the 2 companies' financial statements in the Q1 of 2024 and restated the full year 2023 incorporating Vinesse's financials for comparison purposes. The impacts on the financial statement in the Q1 of 2024 include a $4,700,000 increase in R and D and a $11,300,000 increase in depreciation expense. We kicked off 2024 with $302,600,000 in revenues for the Q1.

Speaker 3

At the lowest season in the domestic market, this is a decline of 31% compared to the previous quarter, but an improvement on a year over year basis with revenue up by 269.7%. I would like to remind you all that Q1 2023 recorded only about 6.8% of our full year's revenue or only 5% of our 2023's total delivery. Our Q1 in 2024 was in line with our Internet forecast on the expectation of increasing brand awareness and acceptance, positive impacts of our active sales and marketing campaigns and the early contribution of our expanded dealership network. Our gross loss in the Q1 of 2024 was $150,800,000 equivalent to a gross margin of negative 49.8 percent as compared to negative 172.9 percent in the Q1 of 2023 and negative 43% in the Q4 of 2023. The improvement of gross margin over the Q1 of 2023 was attributed to increased sales and improved costs.

Speaker 3

As Q1 sales was low seasonally, gross profit margin declined compared to the Q4 last year, mostly due to depreciation. Our bill of materials has showed constant progress and will be one of the key drivers for lower cost and profitability. On the operational front, we have made strides in improving our profitability. Our operating loss in the first quarter of 2024 was $421,800,000 representing a decrease of 7.8% from the Q1 of 2023 and a decrease of 15.4% from the Q4 of 2023. This was largely due to the decline in our R and D expenses, the majority of which were front loaded by design in the early years of our product development.

Speaker 3

With increasing product readiness, expanding dealership network and growth brand awareness, We expect our operating margins to improve in the future. Turning to our liquidity position. As of 31st March, 2024, we have not utilized our reserve of $1,800,000,000 including cash on hand, reserves in grants from Foundair and our Elok facility. This can continue to support our cash needs for operations and mandatory CapEx needed underlying our growth plan this year. We expect a lump sum CapEx between $1,000,000,000 $1,500,000,000 in 2024, majority of which is to fund the contractions of VinFast manufacturing facilities in the U.

Speaker 3

S, India and Indonesia. We plan to fund this using our liquidity reserve, as mentioned above, and if needed from the new funding resources combining Equity and Equity Link. We committed to our manufacturing expansion plans, but also understand the ability to achieve our top line target of 2024 independently as our Vietnam's product run and growing global distribution network can support such growth. Our debt service is prepared using refinanced or expanded facilities that have been agreed in principle with our partners besides being supported by our self generated cash flows. In summary, our financial performance in the Q1 of 2024 is in line with our internal forecast.

Speaker 3

We continue to accelerate the foundational work to meet our 2024 targets in the next quarters. The executive team has a very flexible and adaptive mindset to address real market conditions quickly. And as Madame Cui has mentioned earlier, we are very excited about our second half and the longer term outlook of WinFast. With that, I will turn back to Madame Cui for closing remarks.

Speaker 2

Thank you, Lanai. Finally, I would like to conclude reaffirming our target of 100,000 deliveries of 2024. We stay focused on launching new products and entering new markets to support this target. Cost control is a priority for us and we have showed progress quarter over quarter since last year and continue to be our daily to do item including bump cost, production cost, general operational cost and always screening and opting for the most cost effective option available. We maintain our target of breakeven by the end of 2025.

Speaker 2

I would like to hand over to the operator for the Q and A section.

Operator

Thank you.

Speaker 1

Thank you, operator. We already have the first two questions from Tuk Tang, the Capital Securities Company. The first question is, how do you plan to achieve 100,000 EV guidance while Q1 is only slightly more than 9.3%.

Speaker 3

Thank you. We maintain our guidance

Speaker 2

of 100,000 EVs in 2024. Lower priced products to be added in the coming quarters, targeting a broader customer base combined with a growing dealership network and expansion to the market will make our EV much more accessible to customers and have accelerate in fast rollout and drive our sales growth in second half of the year. As Lanang already mentioned earlier, so the Q1 performance is in line with our internal forecast, reflecting a low season for Vietnam and delivery based on the existing models mostly. Overall, the first half of twenty twenty four is the time where we focus on the foundation for growth in the second half, including signing with dealers in the U. S.

Speaker 2

And globally accelerating the opening of each showrooms with them and at the same time continuing to complete the development of products and different variances to be added to the market.

Speaker 1

Thank you, Madam Cui. We have the second question. How many of your deliveries in Q1 came from GSN?

Speaker 3

Thank you. Vietnam remains the key markets in Q1 and products for the market overseas are underway to be out and delivered in the coming quarters. And for GSM, GSM in Q1 is about 52% of total deliveries, so less than last year.

Speaker 1

Thank you, Ms. Anwin. We have the next question from John Murphy, Bank of America. Can you disclose the profit from e scooters versus EV, maybe even just directionally?

Speaker 2

So East Gueter have been in the market longer than EVs, and so we have time to optimize on them. The profit on EV taking a little bit more time. Is good to us getting there in terms of

Speaker 1

like a breakeven. So yes. Thank you, Madam Cui. The second question is when is your target going to reach gross profit breakeven? Has anything changed with recent EV pricing pressures?

Speaker 2

We remain to target gross profit margin breakeven by 2025. Some models might return profit earlier than others because they've been on the market for longer, but overly 2025 is still the target for the whole portfolio. Pricing pressure, we are accessing and we continue to study the impact of the market conditions. We adopt, as you can see, a very flexible approach in our go to market execution to make sure that it fits the market conditions that we enter. And we are able to do so thanks to the wide range of products, especially those at very affordable price point.

Speaker 2

So we are very diversified in our market target, which give us room to be creative as well. The ultimate and the most important goal for us is to achieve our target and make sure that our offering is competitive and we take care of the total cost ownership throughout the life cycle for the customers, basically giving them high value for the purchase.

Speaker 1

Thank you, Madam Tui. And the third question from John is, could you make sense to focus on growing in fewer markets to focus volume growth and expand markets later? Yes. We

Speaker 2

continuously evaluate our entry into each of the markets. As you can see,

Speaker 1

we are also in the pipeline.

Speaker 2

A few markets that few of the markets are actually important to us and we focus our resources on those markets. However, we have the opportunity to play on a global field, thanks to our unique benefit from the trade agreements with many countries and we are not restricted by geopolitical constraints. So we would like to roll out to multiple markets where we can. Yes, but you wouldn't see that certain markets are important to us, and we focus more resources on those markets.

Speaker 1

Thank you, Madam Cui. We have the next question from Tuk Tung. What is your refinancing plan for the domestic bond was RMB 11,500,000,000,000,000 that will mature in December 2024.

Speaker 3

So this is a tech combined bond, which is already in the refinancing plan agreed with our partner.

Speaker 1

Thank you, Ms. Anghui. We have the next question from Toh. Why did the loss in Q1 2024 gross margin widened versus Q4 2023? For the loss in Q1 2020,

Speaker 3

the gross margin in 2020 for Q1 widened versus Q4 2023 due to the low seasonal sales. Coprofit margin was higher compared to the Q4, mostly due to the depreciation allocated to the low volume. In fact, our bill of material has shown a constant progress and now will be one of the key drivers for lower cost and cost for capability as mentioned.

Operator

Dan Ives from Wedbush. Your line is now open. Please ask your question.

Speaker 4

Yes, thanks. So can you just talk about how important is Indonesia on the growth plan, especially this year?

Speaker 2

Hi, Dan. Nice to hear your voice. Indonesia is one of the key important market for us. It's a large market, over 130,000,000 people, 3rd most populous country in the world, very low EV penetration. And so we start out in the market on the same footing as with other people.

Speaker 2

So it's very, very important market and it's part of ASEAN as well. And we've been focusing on this market from the beginning of the year.

Speaker 4

Great. And then just a follow-up. So, Matt and Tui, when you think about the $100,000 for the year, and here it is, we're seeing in April, I mean, does it feel like everything is sort of tracking relative to expect and maybe thinking about where we were even 3, 4 months ago? Can you just talk about that just from a trajectory perspective in terms of as much as you could talk about it?

Speaker 2

Sure. Q1 is Q1 lastly tracked our internal plan for the year. So we also we're confident about the guidance of 100,000 vehicles. As I mentioned from the last earnings call, the most of the deliveries will happen in the 2nd year. We still rely a lot on the domestic market.

Speaker 2

However, we also started expanding into international markets. And as the products are available for international markets and dealership agreements are signed, the showrooms are open, markets enter, we will start seeing more volume coming in next one. We're still confident about the number.

Speaker 4

Okay. Awesome. Thanks.

Speaker 1

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Brian Dobson with Chardan Capital Markets. Your line is now open.

Speaker 5

Hi, good morning. Thanks very much for taking my call. So I guess first, you provided some good color on the expansion of your hybrid dealership network in the United States. Do you think you could speak to some of the feedback you're hearing from those dealers? What the new potential dealers are excited about?

Speaker 5

What some of their hesitancies might be and the overall tone of those conversations?

Speaker 2

Sure. So we signed 10 more dealership agreements in Q1 with the addition of the 6 agreements that we already announced. So we have 16 dealership agreements signed in the U. S. We are still evaluating I think 32 different applications for about close to 150 locations in the U.

Speaker 2

S. So very robust pipeline of showrooms that for consideration in the U. S. The feedback that we receive is pretty positive as you could see that 2 of the dealership points already opened and started selling in Q1. The feedback from the customers good about the products, we receive a lot of also constructive feedback from the dealers as well in order to improve our own service and product offerings.

Speaker 2

But so far, the dealers are very excited and very cooperative and happy with us.

Speaker 5

Thank you for that color. As you're thinking about sales through the balance of the year, there have been many recent reports that have pointed to weaker near term electric vehicle demand and rising production of hybrid vehicles. Do you think that that's a very U. S. And European focused viewpoint?

Speaker 5

And furthermore, do you believe that potential relative softer demand in the near term in those markets could be offset by potential sales in Asia and the rest of the world, other markets that you're selling into?

Speaker 2

Yes, we believe that the sales for EV is still growing. Maybe it's not growing as fast as the growth as fast growth rate as before, but it's still growing and that clearly show in the statistic for all the regions even in the U. S. And European markets. Actually, you brought up a very interesting point that maybe it's different between U.

Speaker 2

S. And European and other markets. Because I think in U. S. And European modified markets, we would start having to after the initial adoption, then you have to start dealing with the adopting the mass market, right, with people that use the EVs for their value.

Speaker 2

So this is in a more nascent market like Indonesia and India, like ASEAN for us, where EV adoption is still very low and we will start by enabling the adoption with various strategy. So our approaches to more developed markets versus some nascent market slightly different as well and the potential are also different in those markets.

Speaker 5

Yes, thanks. I think that's an important point to distinguish there. And then I guess just thinking about the balance of the year, I suppose EV sales were roughly sub-ten percent in the Q1, which was pretty close to our expectations. As you're thinking about sales cadence in 2Q, 3Q and 4Q, I suppose right now, do you think that the lion's share of sales will be coming in the back half of the year? Can you give us any additional color on cadence?

Speaker 2

Yes. So we as we if you look at some major I mean Vietnam will continue growing as we adding more vehicles, right? So we have 7 just started, so we especially when the VF 3 come in towards the end of the year, we will start seeing more volume from the affordable models. Because in Q1, you could see that about half of our sales from the VF5. So and people are very excited about the upcoming more affordable model VF3.

Speaker 2

So Vietnam will continue growing the other markets in our as we start delivering in end of Q2, early Q3 and then in Q4, we start seeing the volumes in those market as well. And in the U. S. And North America in general, as we add more and more dealership points to our mix and as they start selling in the whole North America, you will also start seeing more volume coming in. So we are still confident about the guidance of 100,000 vehicles per year for this year.

Speaker 2

And but most of it will start coming in more in Q3 and Q4 this year.

Speaker 5

Excellent. That's very encouraging. Thanks so much.

Speaker 2

Thanks. Thanks a lot.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Andreas Schappard with Cantor Fitzgerald. Your line is now open.

Speaker 4

Hi, good morning everyone or good evening and congratulations on the quarter and thanks for taking our questions. I think a lot of our questions have been asked by now, but maybe just following up on Brian's questions. Similarly, how should we think about gross margins throughout this year and maybe early into next year, understanding that the higher volume vehicle deliveries will come into second half. So presumably, that's when we'll see the big improvement in margins. But just curious if you could perhaps give us some color on how should we think about margins for next quarter and maybe for the second half of this year?

Speaker 4

Thank you.

Speaker 2

Hi, Andres. So as I mentioned in the last earning call and it's we are tracking similarly to previously where we believe that we should be getting close to the gross margin breakeven for the whole portfolio by the end of this year, early next year. Different products are different. The products that are more mature like in like we have E34, VF5 in Vietnam, for example, we're getting there faster. And the newer products in newer markets with smaller volume, we'll get there a little bit slower.

Speaker 2

But as a whole portfolio, we're heading into gross profit margin positive early next year. So that's the plan.

Speaker 4

Got it. Thanks, Dewey. That's helpful. And maybe to follow-up there. How should we think about liquidity and potential capital raising opportunities throughout the year?

Speaker 4

I'm wondering how you're thinking about that still and any color there that you can provide? Thank you.

Speaker 2

So as Lanai mentioned before, we still have the same pool of liquidity that we had in at the beginning of the year. So we haven't tapped into it yet. The cash business the cash, the grant from our shareholders, the eloc, they all feel intact. And we've been continuing the operations. We have multiple fundraising in the pipeline as well for various projects.

Speaker 2

So as we they materialize, we will be able to discuss more. But we also plan for we plan our investment spending accordingly as well. Otherwise, we still have the liquidity reserve. We still have our operations, and we're pushing according to the plan.

Speaker 4

Got it. That's very helpful. Thank you. And maybe just one last one if I could. Just wondering any updates on the North Carolina facility And is that still on track for middle of next year?

Speaker 4

Thank you.

Speaker 2

North Carolina is still ongoing. We're still on track to start the operation by the end of like end of next year, start hiring in a lot of workers and putting in operations by the end of next year. But probably the full operation will take a couple of months.

Speaker 4

Wonderful. Great. Thank you so much. I'll pass it on. Thanks again.

Speaker 4

Bye bye.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Tyler DiMatteo with BTIG. Your line is now open.

Speaker 6

Yes. Hi, good morning, everyone. Thanks for taking the questions here. I wanted to just talk a little bit about India here and the recent news from the government trying to incentivize EVs and a lot of global auto OEMs potentially looking to enter the market. I mean, could we see you guys try and pull that factory forward?

Speaker 6

I guess just broadly speaking as well, how are you thinking about the strategy for that market given the constructions ongoing at the facility today? Just any broad strokes on that? Thank you.

Speaker 2

Thanks, Tyler. We also benefit similarly from the EV policy in India with our factory. So we also get significant get the benefit before we tax benefit before we open the factory as well as the incentive from the government for investing in India. So the factory is we clear the land. I was there last week.

Speaker 2

We cleared the land. We started the construction. It's so we implement a very kind of frugal CapEx plan with that factory. So we're building what we're building is 50,000 CKD factory, simple, effective to start with. And we can scale it up as and when needed.

Speaker 2

But right now, the total investment is not major. There's a lot of benefits coming from the government as well for building the EV factory in India. So we see a lot of benefits out of that. And also, India market since you brought it up, it's a very important market for us. However, the consumers are quite price sensitive and sensitive to the warranties and other the service of the company.

Speaker 2

So we believe that our wide range of products and our warranty, our market the industry leading warranty will have further comfort the consumer in India. So huge market again and we have a lot of confidence in the market.

Speaker 6

Okay, great. And then in terms of the margin breakeven target, I'm curious, how much of the incremental benefit of reaching that target do you expect to kind of just come from overall fixed cost absorption as you scale up the factory versus benefits of component sourcing and bill of materials? Just curious how you're thinking about squeezing out some incremental efficiencies there as you look to roll out the different products here and increase presence in the market?

Speaker 2

So last year was in the last year and a half when we started building the vehicles factory here in Vietnam. But as you know, at the beginning, it always there's a lot more visitors. We have a lot more fight tuned to do. So we did a lot in terms of optimizing the production in the past year, year and a half already, and we achieved a lot of optimization from the production cost per unit. However, as we ramp up the volume, then a lot of the fixed cost can be spread over the higher volume.

Speaker 2

And then as a result of that, unit cost will be lower. So we expect that this year as well. However, most of the savings or most of the optimization, we believe will come from the optimization of the build of material and all the initiatives like hundreds of initiatives that we are taking this year in order to bring down the bond cost. There are other cost optimization initiative as well like operational cost in general, but we think that the bond cost win optimization and the volume scale will bring the most saving for us per unit.

Speaker 6

Okay, great. Thank you. Really appreciate the time. I'll turn it back to the queue.

Operator

Thank you. I'm currently showing no further questions on the phone lines. I'd like to turn the call back over to Ni Wen for closing remarks.

Speaker 1

Thank you, operator. We have the next question from Hing Fan. How is your negotiation with PVR to establish charging points in the gas station?

Speaker 3

With the PVR, we've been fast to maintain a corporation with PVR to set up a charging station throughout PPOA gas station that most parties can share new to revenue sharing.

Speaker 1

Thank you, Ms. Anh Nguyen. We'll have the next question from Tan Lei, BCBF. Please share your criteria to choose to cooperate with a dealership. And what are the typical terms in the cooperation between VFS and a dealership?

Speaker 2

So let me talk about the term first. I think our term for we have basically the same terms for dealership in different markets, we have different set of terms like for example, in Vietnam market, in U. S. Market, Canada, Europe and the Middle East, for example. So we have basically similar terms for those dealers because each of the markets have the have different they have specific characters to them.

Speaker 2

In each of the markets, we take applications from the dealers and we evaluate various criteria for the dealers starting from their performance, their history with other brands, their financial situation, their especially the location and the showroom that they want to open with us. We get to know the dealers intimately to see because it's a long term partnership. So we need to get to know our partners. So it's a very detailed process in order to get to know the dealers before we sign the dealership agreement with them.

Speaker 1

Thank you, Madam Thuy. We have another question from Mike Novak. Can you confirm details of the VF7 launch in North America, such as starting price, first delivery date?

Speaker 2

So the current plan is to start delivering VF7 in the U. S. In Q3 or Q4 this year. We will announce the starting price later when we right before the launch of the market.

Speaker 1

Thank you, Madam Clee. We have now concluded the Q and A section. Thank you everyone again for joining us today. Should you need any clarification, please let us know by sending an e mail to iryinfathpaulter.com. We look forward to speaking with you again soon.

Speaker 1

Take care and goodbye.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.

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