Vingroup Bets Heavily On VinFast EVs Despite RM27 Billion Losses

Vingroup, Vietnam's top conglomerate, appears to be increasing its attention on its electric vehicle (EV) initiative despite significant financial issues stemming from its EV subsidiary VinFast Auto.

According to Reuters, VinFast is struggling to attract buyers amid a global downturn in EV demand. Over the past three years, VinFast has incurred significant losses totaling $5.7 billion (RM27 billion), leading to a 38% drop in Vingroup's share price since VinFast first listed on the U.S. market last August.

Despite its grandiose objectives, VinFast has mostly relied on Vingroup firms for sales and financing. A substantial amount of its revenues were from vehicle sales to Green SM (GSM), a taxi operator owned by its founder, Pham Nhat Vuong. VinFast's sales figures also include deals with Vinhomes and Vingroup, as well as incentives for Vinhomes' new home customers.

Furthermore, Reuters claimed that VinFast has received significant cash inflows totaling $11.4 billion (RM54 billion) from Vingroup, its affiliates, and Pham Nhat Vuong since its founding in 2017.

To address financial challenges, Vingroup recently announced a $1.6 billion (RM7.6 billion) stock and asset sale in its profitable retail company, Vincom Retail, with a portion of the profits put aside for VinFast, highlighting its "growth potential".

However, VinFast's sales strategy has so far experienced significant obstacles, with its vehicle portfolio failing to entice buyers. Furthermore, production rates remain low, despite its Haiphong production plant having a 300,000 vehicle production capacity due to sales falling short of expectations.

Having said that, VinFast anticipates selling 100,000 vehicles this year as part of its global expansion strategy. VinFast's goal will not be easy, even though ASEAN EV sales are likely to rise in the face of a global fall in EV demand. VinFast has begun its sales campaign in Indonesia and is anticipated to enter Malaysia shortly.

Despite VinFast’s causing Vingroup's net profit margin to be halved, the group remains committed in supporting VinFast's growth, with plans for significant capital spending and the founder pledging additional funds for charging station infrastructure.

Vuong has highlighted Vingroup's dedication to VinFast, citing social responsibility and national patriotism as motivators for the effort. VinFast is currently worth $9.2 billion (RM44 billion).