Vietnam’s leading conglomerate, Vingroupis ramping up its electric vehicle business with global ambitions, but financial risks loom over its struggling unit, VinFast Auto Ltd VFS.
To know more: Emerging Tesla challenger VinFast faces sales challenges, posing risks for Vietnamese billionaire Pham Nhat Vuong’s Vingroup
VinFast’s rapid expansion relies heavily on sales to related entities, a trend that is expected to persist this year despite difficulties in attracting individual buyers and amid declining global demand for electric vehicles, according to Reuters examination of recent filed documents and company data.
The findings highlight Vingroup’s concerns as VinFast has suffered losses totaling $5.7 billion over the past three years.
Since VinFast’s listing in the US in August last year, Vingroup’s shares have fallen 38%, while its borrowing costs have risen.
According to a late March filing with the U.S. Securities and Exchange Commission, VinFast has secured $11.4 billion in capital injections from Vingroup, its affiliates and its billionaire founder Pham Nhat Vuong between its founding in 2017 and December 31, 2023, Reuters added.
Last month, Vingroup revealed a $1.6 billion stake and asset sale in its retail unit Vincom Retail, a significant profit generator alongside real estate subsidiary Vinhomes, which, despite remaining profitable, is running into challenges in the real estate market.
Vingroup informed Reuters that a portion of the proceeds would be allocated to VinFast, underlining its greater growth potential, the report said.
Most of VinFast’s retail sales in Vietnam were boosted by substantial discounts resulting from a joint marketing campaign with Vinhomes, according to Reuters. The extent of its reliance on Vingroup for sales and financing had not been disclosed before.
VinFast had previously said that around 70% of vehicle deliveries over the past year were destined for Green SM (GSM), a taxi operator and leasing provider 95% owned by Vuong, the report said.
Vingroup said Green SM’s profitability may not be immediate, but expects it to occur “well before 2030”, Reuters added.
Additionally, drivers can transition from employee to partner if they own a VinFast car.
VinFast’s ambition to nearly triple vehicle sales this year faces headwinds due to falling global demand for electric vehicles, which may require further financial support from the group, Reuters added.
Despite previously saying it had lined up strategic investors on its public listing, the electric vehicle maker has seen its shares plunge 97% from its post-debut peak, with a market capitalization of $9.2 billion, much lower than that of the traditional US car manufacturer. Ford Motor Company F.
Price Action: VFS shares closed 10.67% lower at $3,600 on Friday. After hours the shares rose 1.67%.
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This content was partially produced with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
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