Vingroup, chaired by billionaire Pham Nhat Vuong, has granted substantial loans to electric car manufacturer VinFast, alongside significant investments in the company.

According to Vingroup's Q2 2024 financial report, by the end of June, the conglomerate had over 52.2 trillion VND (more than $2 billion) in outstanding loans to VinFast, including nearly 44.826 trillion VND in short-term loans and about 7.429 trillion VND in long-term loans.

These loans to VinFast account for more than 77% of Vingroup’s total loans to its subsidiaries, with an interest rate of 11-12% per year, similar to other subsidiary loans.

Regarding investments, by the end of Q2, Vingroup had invested over 65.7 trillion VND (nearly $2.6 billion) in VinFast, out of a total of more than 175.9 trillion VND (nearly $6.7 billion) invested in its subsidiaries.

These loans are part of a strategy to help the Vietnamese electric vehicle company expand its production and sales globally, including in Vietnam, Southeast Asia, the US, and Europe.

VinFast is enhancing quality, encouraging customers to use electric vehicles at reasonable costs, promoting green transportation, investing in battery technology, and improving safety while reducing costs. The aim is to achieve profitability through high-volume sales, targeting hundreds of thousands of cars annually.

VinFast has commenced construction of factories in North Carolina (USA), India, and Indonesia. In the first half of the year, VinFast entered markets in Indonesia, Thailand, and recently opened its first three dealership stores in the Philippines in early July.

Aligned with its goal of becoming a tech-industrial-services conglomerate by 2028, Vingroup's manufacturing sector (mainly electric vehicles) remains a significant pillar, generating nearly 14.2 trillion VND in revenue in the first half of the year.

Real estate business revenues led with over 27.1 trillion VND, followed by real estate leasing (over 2.4 trillion VND), tourism and entertainment (over 3.9 trillion VND), healthcare (over 2 trillion VND), and education (over 2.8 trillion VND).

Overall, Vingroup recorded a total revenue of over 65 trillion VND in six months.

Despite increased revenue from financial activities, Vingroup reported a consolidated net profit of just over 2 trillion VND, due to significant losses in the manufacturing (electric vehicle) sector. Specifically, the pre-tax loss in manufacturing amounted to nearly 18.9 trillion VND.

Real estate business profits reached nearly 9.7 trillion VND, real estate leasing profits exceeded 1.5 trillion VND, while tourism, entertainment, and healthcare collectively incurred a loss of over 1.8 trillion VND.

In 2023, VinFast recorded a net loss of nearly 18.3 trillion VND, compared to nearly 18.9 trillion VND in the first half of 2024. In 2022, VinFast lost 33.5 trillion VND.

Electric vehicle companies are aggressively expanding production and sales globally to capture market share early and avoid potential taxes on these products.

In early July, Chinese electric vehicle giant BYD opened its first factory in Southeast Asia, in Rayong, south of Bangkok, with a capacity of 150,000 cars per year. Within Southeast Asia, the import tax on cars is 0%.

The European Commission (EC) and the US recently increased taxes on Chinese electric cars, but BYD is building factories in Turkey, Uzbekistan, Brazil, and Hungary to penetrate various markets worldwide.

Chinese electric car manufacturers and Tesla are also ramping up exports of low-cost electric cars.

While Vietnam, with a population of 100 million, remains relatively small, the trust in electric vehicles is growing. Expanding production and sales in other international markets may be a necessary choice. In mid-July, VinFast officially broke ground on an electric car factory in Indonesia, the most populous country in Southeast Asia, with an investment of $200 million and a projected capacity of 50,000 cars per year.

At Vingroup's 2024 annual general meeting, Chairman Pham Nhat Vuong reaffirmed that VinFast is Vingroup's mission and future, stating, "We will never let it go." In a mid-June interview with Bloomberg TV, the billionaire said he would support VinFast financially "until the money runs out."

Vuong is confident in steering VinFast through difficulties, despite global challenges faced by giants like Toyota and Volkswagen.

Bloomberg experts noted that VinFast needs to build its brand and compete with major rivals, requiring significant time and investment.

At the 2024 AGM, Vuong announced his personal commitment to arrange an additional $1 billion in funding for VinFast, aiming to fully develop the brand.

He acknowledged the challenges of making electric cars but believes the most difficult time has passed, and the market has recovered. Vuong is convinced that electric vehicles represent a sustainable and irreversible trend.

Regarding charging stations, Vuong announced a 10 trillion VND investment over the next three years to build charging stations, despite most consumers driving under 100 km per day and being able to charge at home. Vietnam's richest billionaire believes VinFast will achieve positive EBITDA by 2026.

According to Bloomberg calculations, as of mid-June, Pham Nhat Vuong owned assets worth approximately $5.3 billion. Forbes reported that as of July 20, his assets were valued at $4.1 billion.

Manh Ha