Vietnam’s Vingroup and its founder pledge 85 trillion dong in funding to VinFast
This fresh infusion of funds is aimed at reducing VinFast’s reliance on external capital for growth
[HO CHI MINH CITY] Vietnam’s largest conglomerate Vingroup has committed to providing its unit VinFast additional loans of up to 35 trillion dong (S$1.85 billion) by the end of 2026.
The group’s billionaire founder Pham Nhat Vuong has also pledged a sponsorship of 50 trillion dong to the loss-making Vietnamese electric vehicle (EV) maker.
A representative of Vuong’s office said: “The newly secured funding source provides VinFast with the necessary financial resources to achieve sustainable growth without relying on external capital.”
Vingroup said in a statement, however, that the funds would be drawn down on only if VinFast’s fundraising efforts from external sources fall short of the desired outcome.
Vingroup’s commitment to VinFast
The conglomerate said it would also convert all existing loans to VinFast, totalling about 80 trillion dong, into dividend-entitled preferred shares to alleviate short-term financial pressure on the EV maker.
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“Vingroup’s support agreement is based on a careful analysis of the potential impact on its cash flow and profitability,” it said, adding that the funding proceeds would come from Vingroup’s business activities, dividends from subsidiaries and possible strategic divestment of certain investments and units.
Last month, The Business Times reported that Vingroup has sought to divest from two artificial intelligence-focused firms, VinBrain and VinAI.
It is not yet clear how many VinFast shares will be given to Vingroup after the deal. The conglomerate now holds roughly 51 per cent of effective interest in VinFast entities globally, including the Nasdaq-listed VinFast Auto, of which Vuong owns almost 98 per cent.
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According to the group’s Q3 financial reports, Vingroup had loaned the Hai Phong-headquartered VinFast Trading and Production over 66.5 trillion dong (S$3.5 billion) by the end of September; the sum accounted for more than 80 per cent of the firm’s total loans to its subsidiaries.
Vingroup had also invested over 65.7 trillion dong in the EV manufacturing entity, out of a total of over 168.4 trillion dong invested in its units as at the end of the third quarter.
“Once VinFast achieves profitability and financial independence, Vingroup expects to benefit from its investments in the electric-vehicle maker,” Vingroup added.
The Vietnamese carmaker set a goal to reach the break-even point and cash flow equilibrium by the end of 2026.
Barry Weisblatt, head of research at Vietnam-based VNDIRECT Securities, said: “We think (the 2026 break-even point) is reasonable, given the pace of revenue and profit growth that we have seen and the company’s plans for expansion in Vietnam and other key markets, such as Indonesia and India.”
But in an Aug 16 note, he wrote of the pressure that Vingroup has come under, in that the group was caught between a rock and a hard place, given its narrow solvency capacity and strained cash flow.
Noting that the conglomerate has taken on high debt levels to prop up its automotive manufacturing business in its development phase, he wrote: “Our financial model does not forecast for VinFast to repay its outstanding debts to Vingroup in the foreseeable future. Therefore, converting the debts to pref shares would not affect our valuation or our assessment of Vingroup’s financial health.”
VinFast delivered over 44,000 EVs in the first nine months of this year, which puts it roughly halfway to its full-year sales target of 80,000 units. The firm said it delivered an addition of more than 11,000 EVs to domestic customers in October, 45 per cent of which came from its mass-market model VF3.
This brought VinFast’s total domestic sales for the first 10 months to 51,000 units, positioning the company’s brand as the top-selling one in the country for the period.
VinFast now has a car manufacturing plant which can churn out 300,000 vehicles a year, and four battery facilities in Vietnam. It is set to open two other 50,000-vehicle-a-year factories in Indonesia and India next year.
Constant financial needs
In April 2023, Vingroup and its chairman Vuong pledged to provide VinFast US$2.5 billion in grants and loans.
By the second quarter of this year, Vuong had completed his funding commitment of US$1 billion to the EV maker from his personal wealth; he is still not drawing a salary from Vingroup.
Between 2017 and Q1 2024, Vingroup, its affiliate companies, and external lenders injected a total of US$13 billion into VinFast.
Even with the latest commitments, VinFast remains “committed to raising independent capital” to meet its financial needs, it said.
Last month, Reuters reported that VinFast entered into a non-binding agreement with a consortium of Emirati investors to receive at least US$1 billion in funding.
A year ago, the company said that it had entered a deal with Yorkville Advisors, a global investment fund manager, which could subscribe for up to US$1 billion of ordinary shares in VinFast at any time during the 36-month term of the agreement, subject to certain conditions and limitations.
VinFast’s capital expenditure for 2024 was planned at between US$1 billion and US$1.5 billion. The Vietnamese EV maker’s decision to delay the launch of its North Carolina plant to 2028 may contribute to the optimisation of its capital spending this year, though its operating losses and accumulated losses at the end of June hit US$965.6 million and US$9.23 billion, going by its filings to the US Securities and Exchange Commission.
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