VinFast (NASDAQ: VFS) stock price has come under intense pressure as short interest in the company rose. After peaking at $27 shortly after going public, the stock has dropped to $7, giving it a market valuation of over $16 billion. This valuation makes it bigger than Lucid Motors and Nio.

VinFast Auto, a Vietnamese company, is facing substantial headwinds as it seeks to grow its market share in one of the highly competitive industries in the world. The first headwind is that the EV industry is not growing as it used to in the past.

Many dealers, especially in the US, are complaining that EVs are not having enough demand. Instead, many customers are opting for Internal Combustion Engine (ICE) vehicles. One of the biggest challenges is range anxiety, which makes it impossible for people to take long trips with EVs.

The other challenge is that the charging infrastructure is not ready for the robust demand. While the number of charging stations in the US has risen over the years, outages has also grown. 

Internally, VinFast is also having major headwinds. For one, its vehicles are manufactured in Vietnam, making them ineligible for US tax credits. The company is working to resolve this issue by building a $4 billion factory in North Carolina. This factory will finish construction in 2025. 

The other challenge is that the company will likely need more capital in the coming years. The most recent results showed that the company’s cash and short-term investments stood at $130 million against long-term debt of over $1.8 billion.

At the same time, VinFast Auto is still making substantial losses. Its total net loss jumped to over $617 million in the last quarter. Its net loss has risen to over $2.8 billion in the past five quarters. 

All this means that the company will likely go to the market to raise capital this year. It also means that it has a long path to profitability as we have seen with other EVs like Polestar, Mullen Automotive, Lucid, and Rivian.

The other concern is that its valuation is quite stretched. It is valued at over $16 billion, slightly lower than Rivian’s $19 billion. It is also bigger than Nissan, Subaru, Renault, and Geely, companies that sell millions of cars every year. 

VFS chart by TradingView

The chart above shows that the VFS share price has been in a tight range in the past few months. In this period, it has remained between the support and resistance levels at $4.62 and $9.43. As a result, the Average True Range (ATR) has continued falling, signaling that there is no volatility.

Therefore, the long-term outlook for the stock is bearish as the above concerns remain. I suspect that the shares will drop below $4 this year. The only risk to have in mind is that VinFast has a short interest of over 23%, making it a prime candidate for a short squeeze.

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