Emerging Tesla Challenger VinFast Faces Sales Challenges, Posing Risks For Vietnam Billionaire Pham Nhat Vuong's Vingroup

Vingroup, Vietnam’s leading conglomerate, is grappling with increasing financial risks due to the difficulties faced by its electric vehicle (EV) subsidiary, VinFast Auto VFS. The EV manufacturer’s financial troubles have been amplified by its dependency on sales to associated companies and a declining global EV market.

What Happened: VinFast’s swift growth has been predominantly driven by sales to firms linked with Vingroup. The lack of retail consumers and a drop in worldwide EV demand have further intensified VinFast’s financial predicaments, reported Reuters.

Over the past three years, VinFast has accumulated losses amounting to $5.7 billion, leading to a 38% drop in Vingroup’s share price since VinFast’s U.S. listing in August. The parent company’s borrowing expenses have also surged.

Between 2017 and 2023, VinFast received $11.4 billion in capital infusions from Vingroup and its affiliates. Despite these financial hurdles, Vingroup continues to back VinFast, considering it a high-growth prospect.

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Nevertheless, VinFast’s struggles are apparent even in its domestic market. Last year, 82% of its $1.1 billion in vehicle sales were to companies within Vingroup or owned by Vingroup’s billionaire founder, Pham Nhat Vuong, who controls nearly 98% of the Nasdaq-listed EV maker.

Previously unreported, VinFast’s dependency on Vingroup for sales and funding is evident. The company’s sales pressure is underscored by its substantial discounting and its inability to attract substantial interest from retail buyers, according to the report.

Up to this point, the company has indicated that approximately 70% of its vehicle deliveries last year were allocated to Green SM (GSM), a taxi operator and leasing provider predominantly owned, to the extent of 95%, by Vuong.

Why It Matters: In a significant leadership overhaul in January, VinFast’s founder, Pham Nhat Vuong, assumed the role of CEO. This move was followed by the unveiling of VinFast’s first-ever electric pickup truck concept, the VF Wild, at CES 2024.

However, the company’s financial woes began to surface in August, when renowned short-seller Jim Chanos labeled VinFast a ‘$200 billion meme stock’.

Despite this, VinFast’s market capitalization was skyrocketed in August, securing it the third position globally, trailing only Tesla Inc TSLA and Toyota Motor TOYOF.

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Posted In: EquitiesNewsShort SellersMarketselectric vehiclesEVsJim ChanosKaustubh Bagalkotemobilitypham nhat vuongVinFastVingroup
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