VietNamNet Bridge – The breakup of the State with Vinamotor, in the eyes of analysts, is an “unhappy ending” of a strategy to protect domestic automobile production.

After failing to sell 51 percent of the state’s capital at the Vietnam Motors Industry Corporation (Vinamotor) earlier last year, the government decided to sell the entire business.

Vinamotor was established 51 years ago to become the leading mechanical engineering enterprise under the management of the Ministry of Transport (MOT).

In 2003, the government decided that Vinamotor needed to develop into a key enterprise in the automobile industry.

Vinamotor has been “living well” with the production and assembling of passenger cars, large-size buses (more than 29 seats), and over-10-ton trucks. It has provided transport services and has traded with capital of VND500 billion allocated by the state.

A report from the Vietnam Automobile Manufacturers’ Association (VAMA) showed that automobiles bearing the Hyundai - Vinamotor brand accounted for over 50 percent of the passenger car market share.

Vinamotor’s Dong Vang Factory, assembling automobiles with the localization ratio of 30 percent, is one of very few state-owned automobile enterprises which still can exist in the market.

However, this does not mean that Vinamotor has become a key automobile enterprise as hoped by the State.

The corporation only holds 48 percent of the total capital in Hyundai-Vinamotor joint venture. And though 300 Hyundai-Vinamotor passenger cars were sold in 2014, a two-fold increase over 2013, the figure was modest compared with the total number of cars sold in the same year.

Many of Vinamotor’s 14 subsidiaries, 19 associated companies and two joint ventures have been “living well”. However, the profitable enterprises are mostly those in which Vinamotor holds less than 50 percent of capital.

Meanwhile, only six out of the 14 enterprises in which Vinamotor holds the controlling stakes can make modest profits. Others took losses of trillions of dong.

In March 2014, when the State equitized Vinamotor holding company, it planned to sell 51 percent of the total shares it held, but the effort failed.

Only 3.1 percent of the 51 million shares offered were sold at the price equal to the starting price of VND10,000 per share. This showed investors’ low interest in the “key automobile enterprise”.

Vinamotor, which had total assets of VND2 trillion and stockholder equity of VND526 billion, but took profits in 2010, made a modest profit of VND11.5 billion in 2012 and VND16.7 billion in 2013.

Sources said two institutional investors have expressed their willingness to buy Vinamotor, including a joint stock company in which Vinamotor contributes 20 percent of capital, and a real estate firm.

TBKTSG