A Vietnam-based electric vehicle (EV) company that was promised the largest taxpayer subsidies in North Carolina history to build a manufacturing and assembly plant reported a third-quarter loss that topped $600 million.
VinFast’s net loss of $622.9 million for the third quarter, which is almost 20 percent more than in its second quarter, the EV maker in an Oct. 5 earnings release. The firm has recorded more than $5 billion in losses since shifting to electric SUVs from gas-powered vehicles in 2021.
VinFast is building a $4 billion plant in Chatham County, North Carolina, for which it is set to receive record subsidies.
The $4 billion facility is funded in part by taxpayer funds, with the state promising $854 million over 32 years if VinFast achieves its investment and hiring targets, including creating 7,500 jobs at the facility by 2027. In terms of expected job creation, this is the biggest subsidy provided by the state of North Carolina to a private economic venture.
In addition to $854 million from the state, Chatham County is expected to offer around $400 million to the firm, taking the total taxpayer funds for VinFast to over $1.2 billion. The groundbreaking ceremony for the plant took place in July. Vinfast is expected to kick off production in 2025.
The EV maker has been promised the subsidies and is looking to raise “significant additional capital to support business growth,” according to an Oct. 2 prospectus filed in the U.S. Securities Exchange Commission (SEC).
Such capital “might not be available on commercially reasonable terms, or at all, and could, among other things, be burdensome,” it stated.
The government subsidies provided to a loss-making EV manufacturer raise questions about the economic viability of such expenditure.
Many other EV firms that received taxpayer funding have shut down operations over the past decade. Back in 2014, for example, Missouri-based Smith Electric Vehicles announced the suspension of its U.S. operations after receiving $30 million in funds under President Barack Obama’s 2009 stimulus package.
In August, California-based EV firm Proterra announced that it had filed for Chapter 11 bankruptcy protection. The company, which was once praised by President Joe Biden, received $10 million in loans under the COVID-19 Paycheck Protection Program which were eventually forgiven in May 2022.
Meanwhile, the Biden administration is moving ahead with providing more subsidies to EV manufacturers.
Republican Criticism
The Biden administration’s policy of funding EV production at the expense of U.S. taxpayers has been criticized by Republicans.
During a House Transportation and Infrastructure Committee hearing on Sept. 20, House Republicans sparred with Transportation Secretary Pete Buttigieg on the issue.
“Despite the subsidization, the market is literally not adopting EVs, regardless of what we want to believe or what you want to say,” Rep. Scott Perry (R-Pa.) told Mr. Buttigieg during an exchange.
“You’ve recently moved to Michigan. I understand it, and I just wonder what you have to say to Michiganders who feel the federal government is using their very tax dollars to destroy their industry and their job,” he said. “You’re investing with our money in things that we don’t want.”
In addition to subsidizing EV firms, the Biden administration is spending taxpayer funds to aid the transition of traditional auto plants to EV manufacturing.
Buyer Subsidies
The Biden administration is also using taxpayer funds to provide subsidies to people who buy electric vehicles.Last week, the Treasury Department released new guidance outlining how vehicle dealers can effectively reduce the price of EVs by up to $7,500 for prospective buyers at the point of sale.
As such, the buyer won’t have to wait until they file taxes to claim the credit. The $7,500 credit was approved as part of the Inflation Reduction Act.
While the $7,500 rebates are aimed at boosting EV sales, it creates a situation in which electric vehicle sales completely end up depending on subsidies provided by the government.
In January, energy research firm Rystad Energy said that global EV sales were halved from December amid an “abrupt halt” to subsidies and tax credits.
“The automotive market is usually cyclical, with sales taking a hit after new subsidy rules come into effect at the start of each year, followed by a gradual recovery,” it said in a statement.
Despite the strong EV push by the Biden administration, polling indicates that Americans aren’t yet sold on buying an EV for their next vehicle.
When asked how likely they are to buy an EV, 50 percent of respondents said they were “not too/not at all” likely, with only 38 percent saying they are “very/somewhat likely,” according to a July survey published by Pew Research.
While 70 percent of Republican/Republican-leaning respondents are “not too/not at all” likely to buy an EV, this number was at 30 percent among Democrat/Democrat-leaning participants.
The researchers said, “The share of the public interested in purchasing an EV is down 4 percentage points from May 2022.”
