Vietnam’s foray into auto manufacturing comes at a cost

Its first batch of cars include a hatchback named Fadil, which sells for around $16,950

VinFast Fadil hatchbacks sit inside the automaker's plant in Haiphong, Vietnam, on Friday, June 14, 2019. Real-estate conglomerate Vingroup JSC’s auto unit VinFast marked the rollout of its first vehicles from its assembly line on Friday, embodying the aspirations of the fast-developing country’s government to build a modern manufacturing sector. Photographer: Yen Duong/Bloomberg

Vietnam’s foray into the car business with its own brand comes at a cost to its manufacturer - no initial profit.

“We don’t take profit. So right now we’re still losing money on cars we sell,” Le Thi Thu Thuy, chairwoman of VinFast, Vingroup’s auto unit, said in an interview at the Bloomberg Asean Business Summit in Bangkok on Friday.

VinFast marked the roll out of its first vehicles on June 14 as it looks to tap into the one of the world’s fastest-growing economies. To attract brand-conscious Vietnamese consumers - and compete with giants such as Toyota Motor, Ford Motor and Honda Motor - the company is offering its first line of cars at (competitive) cost, Ms Le said.

Vingroup will continue to subsidise its car business for two to five years, according to her. “With the next models of cars and optimisation of our operations, we can bring the cost down,” she said.

Its first batch of cars include a hatchback named Fadil, which sells for around $16,950 (Dh62,260), a sedan priced at $42,493 and a sports utility vehicle that goes for $60,734.

“We started the company with the domestic market in mind,” said Ms Le, who is also Vingroup’s vice chairwoman. “We see very low car penetration in Vietnam right now. It’s 10 per cent of what it is in Thailand. It’s huge market potential if you can get to Thailand’s level in next few years.”

Vietnam’s motor-vehicle sales rose 16.3 per cent in May from a year ago, according to data from Vietnam Automobile Manufacturers’ Association.