Vietnamese electric vehicle maker VinFast’s losses widened in the second quarter due to rising costs linked to its overseas expansion and impairment charges, although its revenue rose, it said on Friday.
VinFast, which began delivering cars in California last year, said it had a net loss of $773.5 million in the April-June period, up 27% from the first quarter and 40% more than the same period last year.
Revenue rose 33% quarter-on-quarter to $357 million, but its deepening loss underscores the risks to VinFast’s aggressive expansion strategy, which could have repercussions for its parent company, Vingroup.
“We are still a startup, so we expect to make losses for a couple more quarters,” Thuy Le, president of VinFast, told Reuters in an interview.
“However, the industry is volume driven. As we increase volumes and optimize costs, we should be able to break even and become profitable,” he added.
Selling expenses rose 25.5% quarter-over-quarter due to higher sales and marketing costs, along with asset impairments, according to the filing.
The electric vehicle maker’s gross margin stood at -62.7% in the second quarter, primarily due to a $104 million impairment charge on the net residual value of its vehicle inventories, compared to $5 million in the previous quarter.
However, excluding these factors, its gross margin still improved, according to Thuy.
In July, VinFast halted its $2 billion manufacturing project in North Carolina until 2028 due to difficult market conditions. The company also reduced its delivery target for this year to 80,000 vehicles from the 100,000 initially planned.
Deliveries in the first half of 2024 amounted to 22,348 vehicles, well below the full-year target, with half of those deliveries made to related parties, including its taxi operating subsidiary GSM, majority owned by VinFast’s founder.
VinFast has been aggressively expanding into Asian markets such as Indonesia and the Philippines to capitalize on rising demand for electric vehicles in those regions and offset weaker demand in the United States.
However, the company is betting on the domestic Vietnam market for the rest of the year, with deliveries of its VF 3 mini SUV and the VF 5 urban model.
“We are confident in the forecast of 80,000 deliveries for this year, with most of the sales being driven by the Vietnam market,” Thuy said, adding that the EV maker received more orders for the VF 3 than it could fulfill and was only able to deliver 20,000 units this year.
VinFast shares fell 2.02% to $3.88 each in premarket trading on the Nasdaq on Friday. The stock has fallen more than 50% since January.
First published: September 20, 2024 | 18:19 IS
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