Chairman of the Vingroup, Pham Nhat Vuong, announced a present for his automotive brand VinFast. It was gifted the battery-making arm of the group, VinES, at no extra cost. This must leverage the group’s competitiveness in the wake of current market challenges.
VinFast Auto is set to acquire 99,8% of the shares of VinES but pays by only absorbing the debts from the battery maker. The move is a ‘present’ from founder Pham Nhat Vuong, Vietnam’s richest man, and serves to strengthen the chances of the automotive newcomer as a flood of start-ups is saturating the market.
Initially, the debt-laden acquisition will worsen VinFast’s financial results, which reported a growing net loss of 623 million dollars (+33,7%) during the third quarter of 2023. But ultimately, embedding a battery department implies cost-savings of between 5 and 7%, according to the carmaker. VinFast Auto will borrow 462 million dollars to secure the deal.
More than cars
“The acquisition of VinES will help VinFast control our battery technology and supply chain, thus optimizing operating expenses and enriching technology content in our electric vehicles,” said Thuy Le, VinFast’s global chief executive. Both companies are eyeing production facilities in Indonesia, which is rich in nickel.
Merging both activities can bring exciting economies of scale, reduce development time, and integrate the supply chain. Most automakers need to tie up with third parties to secure the battery technology for their EV portfolio, making it more complex.
VinES focuses on researching, manufacturing, testing, and validating battery cells, though the company not only supplies automotive cells but also packs for power tools and e-scooters. It recently became one of the partners of Israeli battery cell specialist StoreDot to develop extra fast charging cells (XFC).
Under the agreement, VinFast Auto acquires all the intellectual rights, the facilities, and the supplier contracts. It helps build an ecosystem for the automaker, which must make it more resilient in the turbulent EV manufacturing and sales market.
Biggest export market
VinFast Auto is on a continuous path of reshaping its operations and financing. The company went to the US stock market (NASDAQ) in August to raise fresh capital (240 million dollars). The 2,5 billion dollars provided in spring were made possible by Vuong again, the stronghold behind the brand, through grants and loans from the Vingroup.
VinFast is available in Europe, with a first delivery batch of 3 000 VF8 cross-over models planned for the upcoming months. They will land in France, Germany, and The Netherlands. The other models will follow in 2024. This would make Europe the company’s biggest export market, as it shipped 2 100 EVs to the US this year.
Sales are building up slowly for VinFast. However, the company did manage to pass the mark of 10 000 deliveries for the first time during Q3.