Brian Jeffrey
Vingroup, led by billionaire Pham Nhat Vuong, has extended substantial financial support to VinFast, a leading electric car manufacturer, along with significant investments into the company.
In its Q2 2024 financial report, Vingroup revealed that it had provided VinFast with loans totaling more than 52.2 trillion VND (over $2 billion) by the end of June. This includes short-term loans of about 44.826 trillion VND and long-term loans of around 7.429 trillion VND.
VinFast’s loans from Vingroup make up more than 77% of the conglomerate’s total loans to its subsidiaries, carrying an interest rate of 11-12% per year, in line with other subsidiary loans.
Additionally, Vingroup had injected over 65.7 trillion VND (nearly $2.6 billion) into VinFast by the end of Q2 out of a total investment of more than 175.9 trillion VND (close to $6.7 billion) in its various subsidiaries.
These financial arrangements are part of a strategic initiative to support VinFast in expanding its manufacturing and sales operations globally, including in Vietnam, Southeast Asia, the US, and Europe.
VinFast is focused on enhancing quality, promoting the use of electric vehicles at affordable prices, championing green transportation, investing in battery technology, and enhancing safety while cutting costs. The objective is to achieve profitability through large-volume sales, targeting hundreds of thousands of cars annually.
Construction of factories by VinFast has begun in North Carolina (USA), India, and Indonesia. The company entered markets in Indonesia and Thailand in the first half of the year and recently opened its first three dealership stores in the Philippines in early July.
As part of Vingroup’s strategy to evolve into a tech-industrial-services conglomerate by 2028, the manufacturing sector, primarily electric vehicles, remains a significant revenue generator, amassing nearly 14.2 trillion VND in revenue in the first half of the year.
Revenue from the real estate business led the way with over 27.1 trillion VND, followed by real estate leasing, tourism and entertainment, healthcare, and education sectors.
Overall, Vingroup reported a total revenue exceeding 65 trillion VND in the first six months of the year.
Despite increased revenue from financial activities, Vingroup posted a consolidated net profit of slightly over 2 trillion VND, primarily due to substantial losses in the manufacturing sector, particularly in electric vehicles, which incurred a pre-tax loss of nearly 18.9 trillion VND.
The real estate business saw profits of close to 9.7 trillion VND, while real estate leasing generated profits exceeding 1.5 trillion VND. However, the tourism, entertainment, and healthcare sectors collectively suffered a loss of over 1.8 trillion VND.
In 2023, VinFast reported a net loss of nearly 18.3 trillion VND, which increased to nearly 18.9 trillion VND in the first half of 2024. In 2022, VinFast had incurred a loss of 33.5 trillion VND.
Electric vehicle companies are rapidly expanding their production and sales worldwide to capture market share early and avoid potential taxes on their products.
Recently, in early July, Chinese electric vehicle leader BYD inaugurated its first factory in Southeast Asia, in Rayong, south of Bangkok, with an annual capacity of 150,000 cars. Notably, import taxes on cars within Southeast Asia stand at 0%.
The European Commission (EC) and the US have recently raised taxes on Chinese electric cars, prompting BYD to establish factories in multiple countries like Turkey, Uzbekistan, Brazil, and Hungary to access diverse global markets.
Chinese electric car manufacturers and Tesla are also increasing their exports of affordable electric vehicles.
Despite Vietnam’s relatively small market size with a population of 100 million, there is a growing trust in electric vehicles. Expanding production and sales in other international markets is seen as a strategic move. VinFast recently initiated the construction of an electric car factory in Indonesia, the most populous country in Southeast Asia, projecting an investment of $200 million and a capacity of 50,000 cars per year.
During Vingroup’s 2024 annual general meeting, Chairman Pham Nhat Vuong reiterated VinFast’s importance to the conglomerate’s mission and future, emphasizing unwavering support. In an interview with Bloomberg TV in mid-June, the billionaire expressed his commitment to financially back VinFast “until the money runs out.”
Vuong exudes confidence in overcoming challenges with VinFast, even amidst global hurdles faced by industry giants like Toyota and Volkswagen.
Bloomberg analysts pointed out that for VinFast to establish its brand and compete with major players, substantial time and investment are required.
During the AGM, Vuong announced his personal pledge to secure an additional $1 billion in funding for VinFast, with the goal of fully developing the brand.
Recognizing the challenges in electric vehicle manufacturing, Vuong believes the toughest period has passed and the market has rebounded. He firmly believes that electric vehicles represent a sustainable and irreversible trend.
With a focus on charging infrastructure, Vuong revealed plans to invest 10 trillion VND over the next three years to develop charging stations, despite most consumers driving less than 100 km per day and being able to charge at home. Vietnam’s wealthiest billionaire foresees VinFast achieving positive EBITDA by 2026.
Estimates from Bloomberg as of mid-June indicate that Pham Nhat Vuong’s assets are valued at around $5.3 billion. Forbes reported his assets at $4.1 billion as of July 20.
