Vietnamese EV automaker VinFast has just secured more funding to continue its operations. VinFast has been offered a loan for billions more from its parent company, Vingroup, including a $2.1 billion “sponsorship” from the Group’s chairman, Pham Nhat Vuong. All this is to achieve a break-even point and cash flow balance by the end of 2026.
As a young Vietnamese EV automaker out of Vietnam, VinFast remains the new kid on the block. To make a name for itself out of the gate, however, the automotive business entity under Vietnam’s largest conglomerate, Vingroup, came out absolutely sprinting off the starting line.
When we saw VinFast debut, it shared immediate plans for simultaneous market entries into the US and Europe, plus plans for an IPO, and several all-electric models entering production.
The “move fast and break stuff” strategy has worked for other new companies in the past, but part of that wreckage usually includes the bank. Scaling is not easy (or cheap), and at the rate VinFast has been moving, it’s even more expensive to do it so hastily.
According to a December 2022 filing with the SEC, VinFast reported whopping net losses of $1.3 billion in 2021 and $1.45 billion through September 30, 2022, with additional losses expected to incur “in the near term.”
In February 2023, Vingroup chairman Pham Nhat Vuong stated he had no intentions of investing any more of his personal money in the automaker. Vuong’s personal assets contributed to the initial $7.5 billion already allocated to VinFast from 2017-2022, alongside money from Vingroup and other lenders.
However, by April of that same year, VinFast received $500 million in nonrefundable grants from Vingroup. Furthermore, Vuong reversed his previous vow and offered the automaker another $1 billion in funding to keep going.
The automaker has since made more headway in global markets but has yet to become a household name. As such, VinFast has taken out another loan from Vingroup and additional funding from its chairman to keep it going through 2026.
VinFast accepts $1.4B loan from Vingroup plus more
VinFast shared news of its fresh round of funding this morning, which includes a loan of up to 35 trillion Vietnamese dong ($1.4 billion) from Vingroup by the end of 2026. Additionally, Chairman Vuong has personally pledged another 50 trillion dong ($2.1 billion) in sponsorship. The company stated that Vuong’s personal financial commitment will not impact the interests of Vingroup or its shareholders.
In a separate move, Vingroup will convert all existing loans, totaling approximately 80 trillion dong ($3.3 billion), to VinFast into dividend-entitled preferred shares. Per the release:
By converting loans to VinFast totaling about 80 trillion dong into preferred equity shares of VinFast Vietnam, Vingroup aims to alleviate short-term financial pressure on the electric vehicle maker. This move will allow Vingroup to maintain its stake in VinFast through dividend rights and the option to convert preferred shares into common shares of VinFast Vietnam Manufacturing and Trading Company or interests in VinFast Singapore.
VinFast shared that this loan and financial support plan aims to provide it with the necessary resources to fund operations, investments, and other obligations. Furthermore, Vingroup’s loan and sponsorship aim to help VinFast achieve the break-even point and cash flow balance by the end of 2026. A representative of Vingroup chairman Vuong’s office spoke about VinFast’s loan support strategy:
With the passion to create a world-class Vietnamese electric car brand, Mr. Pham Nhat Vuong will allocate significant resources to propel VinFast’s advancement. The newly secured funding source provides VinFast with the necessary financial resources to achieve sustainable growth without relying on external capital. This strategic move enables VinFast to prioritize research and development, production, and business expansion.
Despite having billions in loans and financial sponsorship lined up as a safety net, VinFast said it would continue to seek independent capital raises to meet its financial needs. The pledged funds from Vingroup and Chairman Vuong will be utilized only if those efforts are not successful.
Previous funds enabled VinFast to complete the construction of its 300,000-vehicle-per-year manufacturing plant in Cat Hai, Hai Phong, and the R&D of its entire BEV lineup. The company said it is now in a growth phase and has shifted its focus to “boosting sales across all markets and optimizing its cost structure.”
VinFast has delivered over 51,000 electric vehicles in Vietnam through the first ten months of 2024, but sales outside of its native country are going more slowly. Revenues are up, but delivery numbers are not where VinFast would like to be just yet.
Author: Scooter Doll
Source: Electrek
