Vingroup's VinFast faces financial risks amidst ambitious EV expansion plans

Vingroup, Vietnam's largest conglomerate, is aggressively expanding its electric vehicle (EV) business through VinFast. However, VinFast's financial s
...
Vinfast
Despite efforts to boost sales, such as offering discounts and sales to affiliated companies, VinFast has struggled to attract retail buyers and faces weakening global EV demand. (Bloomberg)
Vinfast
Despite efforts to boost sales, such as offering discounts and sales to affiliated companies, VinFast has struggled to attract retail buyers and faces weakening global EV demand.

Vietnam's leading conglomerate, Vingroup, is intensifying its focus on the electric vehicle (EV) sector, aiming for aggressive global expansion. However, its subsidiary, VinFast Auto, faces escalating financial risks, primarily due to ongoing losses. Despite struggles to attract retail buyers and amidst weakening global EV demand, VinFast's growth has largely relied on sales to affiliated companies, a trend expected to persist this year, a Reuters report stated.

VinFast recently became the world's third most valuable carmaker. It unveiled its ambitious plans for India, committing to an investment of 1,665 crore. The electric vehicle manufacturer intends to establish its manufacturing facility in India, alongside Indonesia. Production of electric vehicles is expected to commence in both countries within the next three years.

Also check these Vehicles

Find more Cars
Tata Sierra Ev (HT Auto photo)
UPCOMING
BatteryCapacity Icon69 kWh Range Icon420 Km
₹ 25 - 30 Lakhs
View Details
Mg 4 Ev (HT Auto photo)
UPCOMING
BatteryCapacity Icon64kWh Range Icon350 km
₹ 30 - 32 Lakhs
View Details
Tata Harrier Ev (HT Auto photo)
UPCOMING
BatteryCapacity Icon50 kWh Range Icon400 Km
₹ 22 - 25 Lakhs
View Details
Honda Elevate Ev (HT Auto photo)
UPCOMING
₹ 18 Lakhs
View Details
Tata Punch Ev (HT Auto photo)
BatteryCapacity Icon35 Kwh Range Icon421 km
₹ 10.99 - 15.49 Lakhs
Compare
View Offers
Tata Tiago Ev (HT Auto photo)
BatteryCapacity Icon24 kWh Range Icon 315 km
₹ 7.99 - 11.89 Lakhs
Compare
View Offers

Also Read : VinFast likely to bring in electric SUVs to India after Centre's new EV policy

However, a recent analysis of securities filings and information from the firm indicates that VinFast has incurred significant losses, amounting to $5.7 billion over the past three years. This has led to a 38 per cent decline in Vingroup's share price since VinFast's U.S. listing in August last year, along with increased borrowing costs.

VinFast has received substantial capital injections totaling $11.4 billion from Vingroup, its affiliates, and billionaire founder Pham Nhat Vuong between its establishment in 2017 and December 31, 2023. Despite this, VinFast's challenges persist, with the company struggling to penetrate its home market and relying heavily on Vingroup companies for sales and financing.

VinFast's difficulties are underscored by its modest success in Vietnam, where 82 per cent of its $1.1 billion vehicle sales last year were to Vingroup-affiliated or owned companies. The company's retail sales in Vietnam were largely aided by discounts offered through a joint marketing campaign with Vinhomes.

To further boost sales, VinFast entered into significant agreements with affiliates, including a $419 million deal with Green SM (GSM), a taxi operator and leasing provider primarily owned by Vuong. Despite these efforts, VinFast's sales figures remain below target, with only 35,000 EVs sold last year, representing a fraction of its 300,000 vehicle production capacity.

VinFast's struggles highlight the challenges facing the company as it aims for global expansion and increased sales. The company's reliance on affiliated companies for sales and financing, coupled with weakening global EV demand, raise concerns about its future prospects and the need for further financial support from Vingroup.

Despite these challenges, Vingroup remains committed to VinFast's success, with plans for significant capital spending and the founder's pledge of $400 million to build charging stations in Vietnam. However, investor concerns persist, with VinFast's shares plummeting 97 per cent since its peak shortly after its debut. As VinFast navigates these challenges, its ability to achieve its ambitious growth targets and secure strategic investors remains uncertain.

First Published Date: 14 Apr 2024, 10:34 AM IST
NEXT ARTICLE BEGINS

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city

Want to get the best price for your existing car?

Powered by: Spinny Logo
By clicking "View Offers" you Agree to our Terms and Privacy Policy
Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.