VinFast's Franchise Model: A Strategic Pivot in the High-Tariff U.S. EV Market

The global electric vehicle (EV) market is a battlefield of innovation, regulation, and capital. For VinFast, the Vietnamese automaker's recent pivot from a direct-to-consumer (DTC) model to a franchise-based dealership network in the United States represents a calculated response to a volatile environment. This shift, driven by the need to counteract financial losses and navigate U.S. import tariffs, raises critical questions about the long-term viability of a franchise model in a market defined by high costs, regulatory uncertainty, and fierce competition.

The Franchise Model: Cost Efficiency and Scalability

VinFast's DTC strategy, which saw the shuttering of 15 corporate-owned showrooms in California by mid-2025 after hemorrhaging $3.18 billion in 2024, exposed the fragility of centralized retail operations in a high-cost, low-margin market. The franchise model, now operational in 38 U.S. locations across 14 states, shifts real estate and operational risks to local partners. By partnering with established groups like Sunroad Automotive, VinFast leverages existing customer bases, brand loyalty, and infrastructure, reducing capital intensity. This approach mirrors the success of automotive giants like Ford and Toyota, which have long relied on franchise networks to scale efficiently.

The financial implications are stark. Franchisees bear the costs of showroom maintenance, staffing, and inventory, allowing VinFast to allocate capital to production and innovation. By late 2025, the company had expanded to 30 franchised dealerships, with plans to reach 125 by 2026. This scalability is critical in a market where EV adoption is accelerating but remains concentrated in high-cost regions like California, Texas, and New York.

Tariffs and the Path to Localization

The U.S. government's 25% import tariff on foreign EVs, coupled with a 20% tariff on Vietnamese exports, has compressed VinFast's profit margins. These tariffs, part of a broader push to incentivize domestic manufacturing, threaten to erode the price competitiveness of models like the VF 8 ($39,900) and VF 9 ($62,900). However, VinFast's strategy to localize production through a North Carolina plant—projected to produce 150,000 vehicles annually by 2028—offers a long-term solution. Once operational, this facility will eliminate import duties and reduce delivery times, aligning with the U.S. market's demand for rapid service and localized supply chains.

The franchise model complements this localization effort. By minimizing reliance on corporate-owned infrastructure, VinFast can redirect resources toward plant construction and supply chain optimization. This dual strategy—franchise-driven retail and localized manufacturing—positions the company to weather regulatory headwinds while maintaining agility.

Pricing, Warranties, and Consumer Trust

VinFast's aggressive pricing and warranty policies are central to its U.S. strategy. The VF 8's $39,900 price tag undercuts the Tesla Model Y by over 20%, a critical advantage in a market where affordability remains a barrier to EV adoption. Coupled with a 10-year/125,000-mile vehicle warranty and a 10-year unlimited-mileage battery warranty, these terms address consumer skepticism about long-term reliability. Such guarantees not only differentiate VinFast from competitors but also signal confidence in its product quality, fostering trust in a market where brand loyalty is paramount.

Risks and Rewards for Investors

While the franchise model and localized production offer compelling advantages, risks persist. Delays in the North Carolina plant's construction could strain supply chains, forcing continued reliance on imported vehicles and higher tariffs. Additionally, Tesla's relentless innovation in battery technology and software could erode VinFast's price advantage over time. Regulatory shifts, such as proposed reductions in EV tax credits, may also dampen demand for sub-$40,000 models, which form the backbone of VinFast's U.S. strategy.

For investors, the key question is whether VinFast can execute its 2026 target of 100,000 U.S. deliveries. Success would translate to a $10 billion+ revenue run rate in a market currently dominated by Tesla and legacy automakers. The company's current valuation (a P/S ratio of 0.8x) reflects skepticism about long-term profitability, but this could shift if VinFast demonstrates consistent growth and operational discipline.

Conclusion: A Calculated Bet on the Future

VinFast's franchise model is not a panacea but a strategic recalibration tailored to the U.S. market's unique challenges. By reducing costs, accelerating scalability, and building consumer trust, the company is positioning itself to compete in a high-tariff, high-competition environment. For investors, the opportunity lies in VinFast's ability to balance short-term execution risks with long-term market potential. If the company can navigate production delays, regulatory shifts, and technological competition, it may yet capture 5–7% of the U.S. EV market by 2027—a feat that would validate its bold pivot and reward patient capital.