Vingroup's VinFast Faces Financial Risks Amidst Global Ambitions, With $5.7B Loss Over Past Three Years

Benzinga ·  Apr 13 15:59

Vietnam's top conglomerate, Vingroup, is ramping up its electric vehicle venture with global ambitions, but financial risks loom from its struggling unit, VinFast Auto Ltd (NASDAQ:VFS).

VinFast's swift expansion relies heavily on sales to related entities, a trend expected to persist this year despite challenges in attracting individual buyers and amid a downturn in global EV demand, per Reuters' examination of recent filings and company data.

The results highlight concerns for Vingroup as VinFast incurred losses totaling $5.7 billion in the last three years.

Since VinFast's U.S. listing in August last year, Vingroup's stock has plummeted by 38%, while its borrowing expenses have risen.

According to a late March filing with the U.S. Securities and Exchange Commission, VinFast obtained $11.4 billion in capital injections from Vingroup, its affiliates, and billionaire founder Pham Nhat Vuong between its establishment in 2017 and Dec. 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 encountering challenges in the property market.

Vingroup informed Reuters that a portion of the proceeds would be allocated to VinFast, emphasizing its higher growth potential, the report read.

Most of VinFast's retail sales in Vietnam were boosted by substantial discounts from a joint marketing campaign with Vinhomes, per Reuters. The extent of its dependence on Vingroup for sales and financing hadn't been disclosed before.

VinFast had previously stated that approximately 70% of its vehicle deliveries in the past year were to Green SM (GSM), a taxi operator and leasing provider owned 95% by Vuong, the report stated.

Vingroup stated that Green SM's profitability may not be immediate but anticipated it would occur "well before 2030," Reuters added.

Additionally, drivers may transition from employees to partners if they own a VinFast car.

VinFast's ambition to almost triple vehicle sales this year faces hurdles amidst declining global EV demand, potentially necessitating additional financial backing from the group, Reuters added.

Despite previously claiming that it lined up strategic investors upon its public listing, the EV maker has seen its shares plummeted by 97% since its peak post-debut, resulting in a market capitalization of $9.2 billion, far lower than that of legacy U.S. automaker Ford Motor Company (NYSE:F).

Price Action: VFS shares closed lower by 10.67% to $3.600 on Friday. Shares rose 1.67% after hours.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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