VinFast in North Carolina Shows the Perils of Industrial Policy

Officials offer to bulldoze through two towns to lure the Vietnamese carmaker. But they picked a lemon.

By Scott Lincicome. Excerpts: 

"Eager residents of Moncure and Merry Oaks, N.C., gathered in August 2022 to learn the route of new roads promised as part of a record-setting state subsidy package for Vietnamese electric-vehicle manufacturer VinFast. The state’s answer: straight through 27 homes, five businesses and a local Baptist church that’s been there since 1888."

"But Merry Oaks is still standing. VinFast has announced that the facility won’t open until “at least 2025,” and locals are wondering whether the project—which was one year ago the crown jewel of state “economic development”—will ever be finished. So much for that tight schedule.

The episode is distressing in its own right but provides important lessons about industrial policy"

"In VinFast’s case, what looked like a slam-dunk state investment in 2022 looks different today. Not only have higher interest rates deflated the tech sector; VinFast has suffered other setbacks. Its U.S. sales were delayed by software problems and further crimped by ineligibility for new U.S. tax credits, which the 2022 Inflation Reduction Act provides only to vehicles made in North America. Thus, by mid-May 2023, VinFast had delivered only 310 of the 999 electric vehicles it had promised American buyers by the end of last year, and the company’s VF8 model had received the worst reviews of any new automobile in recent history. This week the company was forced to recall its entire U.S. fleet because a dashboard display error could “increase the risk of a crash.”"

"Industrial policies rarely account for other government laws and regulations that impede a plan’s implementation. The Inflation Reduction Act’s protectionist subsidies will discourage VinFast’s U.S. sales and thus reduce available revenue to fund its North Carolina expansion. State and federal environmental regulations have thwarted the company’s ambitious construction and production schedules. Wetlands and waterways permits are still pending, after the U.S. Army Corps of Engineers returned VinFast’s 284-page application for more information."

"The government’s expedited seizure of local property for manifestly commercial purposes—promised roads and related infrastructure to support only VinFast’s factory—is also a classic case of eminent-domain abuse."

"industrial policy  . . . often requires the expansion and exercise of state power in ways that undermine the economy and achieve the left’s priorities. State planning tends to trample on the principles, communities and people that national conservatives supposedly hold dear."