VinFast breaks ground for its first Indian EV factory in Tamil Nadu's Thoothukudi

Chennai: Fifty days after signing a Memorandum of Understanding with the Tamil Nadu government, Vietnamese electric vehicle maker VinFast on Sunday began work on building its first India factory in the port city Thoothukudi by holding a ground breaking ceremony.

The integrated electric vehicle and battery manufacturing unit will come up in an area of 380 acres at an industrial estate owned by the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) in Silanatham village. Chief Minister M K Stalin and VinFast India CEO Pham Sanh Chau attended the ground breaking ceremony, which comes within two months of the two sides signing the MoU on January 7, 2024.

VinFast, which has the third highest EV market capitalisation after Tesla and Toyota despite its foray into the US not being as smooth as expected, has committed to invest $500 million (Rs 4,000 crores) for the first phase of the project over a period of five years and the amount could go up to $2 billion (Rs 16,000 crore). The facility is expected to generate 10,000 local jobs.

The company plans to finish the construction of the plant in a year and take another one year to roll out electric cars. The new facility, which will have a capacity to produce 1.5 lakh cars a year, will also cater to the export market and that’s the reason the company chose Thoothukudi, which is home to a major port.

Reuters quoted Chau as telling the news agency on the side lines of the ceremony that India should consider reducing import duties on its cars for about two years so customers can get familiar with its products before the new factory is opened.

"We... proposed a reduction of import duty tax ... for instance by bringing it to 70 per cent to 80 per cent just for two years and for a very limited a number of cars in order for the customers to get used to our products,” he told Reuters.

"The central government is still considering it. But while waiting for the final decision of the central government, we move ahead with our construction of the manufacturing facility,” Chau added.

In his remarks at the event, Chau said the project will not only expand VinFast’s global footprints, but also make substantial contribution to local economy creating thousands of jobs and enhancing technical skills of the workforce in Tamil Nadu.

“This is our third manufacturing facility (in the world after Vietnam and US) and we chose Tamil Nadu because we believe in the state’s creative talent and diligence as well as its progressive polices on EV,” he added.

VinFast is the first Original Equipment Manufacturer (OEM) in the automobile sector to enter Tamil Nadu in the last 15 years after Renault-Nissan in 2008.

The company, which is part of Vietnam’s biggest conglomerate Vingroup, competes with US’ Tesla and China’s BYD, which assembles vehicles at a facility in Kanchipuram near Chennai, among other EV makers.

The investment from VinFast is seen as a major boost to Tamil Nadu, which has emerged as the EV hub of India, accounting for over 40 per cent of total planned investments in the EV sector, including two-wheelers.

With Vinfast’s entry, officials said the Tamil Nadu government is planning to position Thoothukudi-Tirunelveli region as the third automobile hub in the state with companies like Bosch and Yokohama tyres setting up manufacturing units in the region.