As Vietnam’s biggest conglomerate Vingroup doubles down on its electric vehicle business with ambitious global expansion plans, it faces growing financial risks stemming from loss-making unit VinFast Auto .
VinFast’s rapid growth has hinged on sales to affiliated companies that are set to continue this year, according to Reuters’ analysis of a recent securities filing and information provided the firm, as it struggles to attract retail buyers and faces weakening global EV demand.
The findings also underscore the risks for parent Vingroup, as VinFast lost a combined $5.7 billion over the past three years. Vingroup’s share price has plunged 38% since VinFast’s U.S. listing last August, and its borrowing costs have increased.
VinFast received $11.4 billion of capital injections from Vingroup, its affiliates and the group’s billionaire founder Pham Nhat Vuong between its inception in 2017 and Dec. 31, 2023, according to a U.S. Securities and Exchange Commission filing in late March.
Vingroup last month announced a $1.6 billion stake and asset sale in its retail unit Vincom Retail, one of its key profit engines alongside real estate subsidiary Vinhomes, which remains profitable but faces a challenging property market. Vingroup told Reuters a portion of the proceeds would go to VinFast, which it said has higher growth potential.
But struggling to penetrate even its home market, VinFast last year generated 82% of its $1.1 billion of vehicle sales from companies that are part of Vingroup or owned Vuong, who is also VinFast’s CEO and effectively controls nearly 98% of the Nasdaq-listed EV maker.
Nearly all of VinFast’s retail sales in Vietnam were also aided hefty discounts offered through a joint marketing campaign with Vinhomes, Reuters has found.
The extent of VinFast’s reliance on Vingroup companies for sales and financing have not been previously reported.
The company had so far said about 70% of its vehicle deliveries last year went to Green SM (GSM), a taxi operator and leasing provider 95% owned Vuong.
Apart from $839 million sales of EVs and e-scooters to GSM, VinFast also had a $57 million EV sales deal with Vinhomes, a $1 million EV sales contract with Vingroup and $7 million of electric bus sales to VinBus last year.
VinFast also offered vouchers worth up to 350 million dong ($14,000) each to new home buyers of Vinhomes last year. EV sales from the discount programme generated around 14% of its EV revenues, the filing showed, which could amount to nearly all of its retail sales in Vietnam.
The heavy discounting highlights the extent of sales pressure VinFast is facing as its lineups from sport utility vehicle VF8 to the VF5 crossover have yet to attract significant interest from retail buyers, keeping production rates at unprofitable levels.
Its 35,000 EVs sold last year, below its 50,000 target, represented just a tiny fraction of its 300,000 vehicle production capacity at its factory in Haiphong. This year it aims for 100,000 sales as it expands globally.