Vingroup's VinFast faces financial risks amid ambitious global expansion plans

Vietnamese conglomerate, Vingroup, is putting more effort into making electric cars, even though its car-making unit, VinFast, is facing financial problems.

VinFast is growing fast. But it is relying a lot on selling cars to allied firmsbecause not many are buying EVs right now.

Vingroup has lost about $5.7 billion on VinFast in the last three years, and its stock has gone down 38 per cent since VinFast started trading in the US in August.

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Vingroup and its boss, Pham Nhat Vuong, have put $11.4 billion into VinFast from 2017 to 2023.

Still, VinFast has a hard time selling cars to people outside the company.

A big share of its car sales, which brought in $1.1 billion last year, were to its own related companies or those owned by Vuong.

Vingroup has tried to help by selling part of its shop unit, Vincom Retail, for $1.6 billion to get more money for VinFast.

But VinFast's way of selling mostly to its own subsidiaries is unlikely to work in the long run.

About 82 per cent of its sales come from internal buys. Even in Vietnam, VinFast employs big price cuts to sell its EVs.

Its big dreams of making and selling record number of cars haven't been reached yet, with sales not hitting goals and making cars still costing more than they make.

VinFast also wants to sell cars across the world, but with fewer people wanting electric cars now, that goal seems tough.

Since going public, its shares have dropped by 97 per cent, making investors worry if it can meet its sales goals and find good partners.

But Vuong says the move into cars is more about wanting to do good and show love for their country.

(With inputs from Reuters)