Vietnam's only automaker: New car sales are sluggish, with a loss of more than 6 billion yuan a year

In recent years, with the development of the mainland economy, the mainland's automobile manufacturing industry has ushered in a period of rapid development. On the one hand, the mainland has obtained cooperation from well-known car companies such as Tesla, on the other hand, domestic cars have achieved good sales at home and abroad. It can be seen that the domestic car is now ushering in a highlight moment.

But Vietnam's auto market is now facing some troubles. Vietnam's auto manufacturing industry is currently in a preliminary stage of development, Vietnam's only automaker VinFast has been threatening to go public in the United States in the second half of 2022. However, due to the poor sales of new cars recently, the company has suffered huge losses, so what is the reason for this?

1. Vietnamese car company Vingroup

Founded in 1993, Vingroup is one of the leading private companies in Vietnam. It has three listed companies with a total capital of US$35 billion and currently operates in three main areas: technology, industry and services.

Vingroup's main business, Vinfast, was established in 2017 to promote a global smart electric vehicle company. At present, the company is located in Jihai, Vietnam and Haiphong, Vietnam, with two automobile production lines. In 2019, the total production volume of these two production lines was 250,000 units. Judging from the current production line, there is serious waste in these two production lines, and the utilization rate is less than 15%.

Last year, Vinfast's traditional internal combustion engine sold just 35,000 new cars, a 20 percent increase from 2020. Vinfast has already announced that it will eliminate traditional gas vehicles before, and this year it will fully transition to a pure electric vehicle brand.

In November 2021, at the auto show in Los Angeles, two new electric SUV models were launched, and the United States also said that it would accept orders for these two electric vehicles. Vinfast also announced that it will set up the company's headquarters in Los Angeles, usa, which is not difficult to find that Vinfast has high hopes for the US market.

Just days after Vinfast's CEO left and returned to Europe, the company announced a European-oriented plan to build Vinfast's first production plant in Germany. The new plant is mainly used to produce electric vehicles, passenger cars and buses.

Second, a loss of 6 billion yuan a year

Why did Vinfast, which originally had very good development prospects, face losses? According to the 2021 company's financial report released by Vinfast, we can see that the pre-tax loss reached 1 billion US dollars, about 6.36 billion yuan, but the sales volume increased by 20% over last year.

Vinfast announced that the reason was due to the long period of social distancing due to the group's real estate leasing, vacation and entertainment activities, which led to the company's losses.

In fact, some experts said that Vinfast lost money, partly due to the poor sales of its newly launched car brands. On the other hand, in order to be able to complete the company's strategic transformation and produce more pure electric vehicles, Vinfast's behavior can be said to be very radical. In just one year, a total of 4 models were launched.

In fact, back in 2020, Vinfast also achieved very good results. Due to the quick success, the research and development of pure electric vehicle technology has been increased, which has led to a loss of $1 billion in automobile production and manufacturing in 2021.

Third, the current situation of Vietnamese car companies

As an emerging industry in Vietnam, Vietnam's auto industry has not made much contribution to the overall economy and industry. Vietnam's automotive industry consists of 13 joint ventures and 6 local companies.

Experts predict that the popularity of cars in Vietnam will be achieved between 2020 and 2030. Previously, Vietnam's auto industry had to import cars to meet consumer demand if it couldn't meet production. In this way, the advantage of entering the market first is lost.

According to the data, Vietnam's automobile production and sales have been growing since 2014, and now it has initially formed a supportive industry. Providing parts for the assembly and assembly of automobiles, Vietnam's automobile industry also exports its own domestically produced parts abroad.

Vietnam's main export markets for auto parts are Japan and the United States. The domestic automotive industry is not yet developed, and there are very few talents in the field of machinery and technology. This is also the main reason for the slow development of Vietnam's automotive industry.

In addition to this, Vietnam's automotive industry faces some problems. The first point is that the domestic market in Vietnam is currently very small. The second point is the price at which cars are sold in Vietnam, which are much higher than those of car brands in other countries in the region. The third point is that when the CEPT (European Postal and Telecommunication Conference) tax reduction roadmap is completed in 2018, competitive pressure from other regions and countries is also increasing. These reasons have led to the slow development of Vietnamese cars.

After 2017, Vietnam initially formed a supportive industry. It can provide some accessories for the assembly and assembly of automobiles, and the localization rate of light trucks under 7 tons, passenger cars with 25 seats and domestic special vehicles is relatively high, which can meet the domestic market in Vietnam.

From the Vietnamese market in recent years, it can also be seen that the automobile industry has gradually developed, from no cooperation to the specialization of cooperation between manufacturing enterprises. At present, the basic materials of vietnam's automotive industry still need to rely on imported materials, and there are fewer local automotive support industries. According to one set of data, there are only 60 automotive suppliers in Vietnam, nearly half of which are foreign investments.

The lack of suppliers and infrastructure has become the main reason for global producers to invest in Vietnamese car companies. Vietnam's automotive industry faces many disadvantages such as poor technical conditions, poor mold technology, lack of support cooperation and product development information.

Before Vietnam joined the World Trade Organization, it had always adopted a policy of high tariffs and high consumption to protect its enterprises. After joining the World Trade Organization, tariffs were lowered in order to suppress domestic manufacturers. For this move of Vietnam, many foreign-funded enterprises dare not invest their assets in Vietnamese car companies, and many manufacturers have chosen to withdraw. As a result, Vietnam's automobile industry will not be able to develop.

epilogue

We can see that the main reason for Vinfast's loss of 6 billion yuan is due to the large amount of money invested in research and development when sales are not good. But judging from the development of Vietnam's overall automotive industry, it can be said that it is not easy for Vinfast to achieve today's results. After the introduction of the global fire ban, the development of new energy vehicles must be a necessary road. Through the continuous development of Vietnamese car companies, I believe that we can survive this crisis in the future.

So what do you think about the future development of new energy vehicles? What kind of attitude do you have towards the development of Vietnamese car companies?