Property firm Vingroup forays into auto industry

Property firm Vingroup forays into auto industry

Quoc Hung

Prime Minister Nguyen Xuan Phuc speaks at the groundbreaking ceremony of the VinFast auto complex in Haiphong on September 2 – PHOTO: VINGROUP

HCMC – Vingroup, a Vietnamese company which is known for high-end housing and resort projects, last week began going on a foray into the auto manufacturing industry by breaking ground for a factory in the northern city of Haiphong.

The VinFast auto complex in Cat Hai economic zone in Haiphong marks a major expansion in Vingroup’s business strategy. The group is already active in property, resort and amusement park, retail, healthcare, education and agriculture sectors.

Vingroup set up VinFast Trading and Production Co Ltd in June this year with total chartered capital of VND5.25 trillion (US$231 million). The name VinFast denotes Vietnam, style, safety, creativity and pioneering for a Vietnamese auto brand.

The offshoot of Vingroup had signed an agreement with Credit Suisse AG to borrow up to US$800 million to develop the auto plant, Vingroup said in a statement posted on its website.

VinFast looks to become a leading automaker in Southeast Asia with its annual capacity of half a million units by 2025, mostly vehicles based on internal combustion engines and batteries, and electric bikes.

In the first phase, VinFast would introduce a five-seater car model, a seven-seater SUV and an battery-powered motorcycle which would all meet European standards. The total capacity of this phase ranges from 100,000 to 200,000 units a year.

The firm said the first electric motorcycle would hit the road in 12 months and the first auto would come off the production line in 24 months.

The 335-hectare VinFast complex has five main workshops with one for pressing, one for vehicle body, one for painting, one for engine production, and one for auto assembly. VinFast said it would buy designs from American and European firms to make main engine parts and structural systems.

VinFast said its autos would meet Euro 5 and Euro 6 emission standards.

The VinFast project lured special attention from Prime Minister Nguyen Xuan Phuc. Though the groundbreaking ceremony took place on National Day, September 2, he attended the event to throw support behind a local company determined to build a Vietnamese auto brand.

Moreover, Phuc said, the project would create 20,000 jobs for local people and contribute to the State budget an amount equivalent to Haiphong City’s current budget revenues from domestic sources.

The project would have a positive knock-on effect as hundreds of projects in supporting industries would spring up, he was quoted by the Government news website in a report.

The report said the Government had underlined the need to develop the auto industry into an industrial mainstay which would lend to a helping hand to the country’s industrialization and modernization drive.

Data from the Ministry of Industry and Trade shows the nation has around 400 enterprises active in the auto sector with annual designed output of some 460,000 units and that the industry directly employs 100,000 workers.

The auto industry, however, has remained underdeveloped though it has benefited from a lot of policy incentives from the Government. It has failed to achieve the localization ratio of 60% set for 2010, said the Government news website report, and local content now accounts for 7-10% of a vehicle’s value.

The target of producing cars with affordable prices has not been obtained as car prices are still as prohibitively high as ever.

PM Phuc described Vingroup’s aspiration for developing a national product brand as “a patriotic act.”

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