VinFast Factory Sale Sparks Governance Concerns At Vingroup
Vietnamese electric vehicle maker VinFast has spent billions of dollars over the past decade pursuing rapid global expansion. Now, a major restructuring plan involving the sale of its main factories and the transfer of nearly $7 billion in debt has raised fresh concerns over governance at billionaire Pham Nhat Vuong’s conglomerate, Vingroup.
Vuong, who began his business career selling instant noodles in Ukraine during the 1990s, transformed Vingroup into Vietnam’s largest company. Through the group, he controls hotels, entertainment businesses and Nasdaq-listed VinFast. However, the conglomerate has also become known for its complex intragroup transactions and interconnected financing structures.
VinFast Shifts Towards Asset-Light Strategy
Under a multi-party agreement announced last week, VinFast will sell its Vietnamese manufacturing business for 13.3 trillion dong ($506 million) to a consortium of investors. The buyers will also assume roughly $6.9 billion in debt tied to the manufacturing operations.
In a regulatory filing, VinFast said the move would allow the company to adopt an “asset-light” model focused primarily on research, development and product innovation instead of manufacturing operations.
Vingroup told Reuters that once the manufacturing unit leaves VinFast’s books, the EV maker will become largely debt-free. Manufacturing expenses played a significant role in VinFast’s $3.9 billion loss last year, and the company has yet to report a profit since its launch in 2017.
Governance Questions Emerge
Despite the strategic logic behind the restructuring, some analysts and retail investors have questioned the deal’s complexity and the involvement of parties linked to Vingroup and Vuong.
Mehdi Jaouadi, partner at Singapore-based consultancy YCP, said the move could strengthen VinFast financially while also raising governance concerns.
One major issue involves Vietnamese real estate businessman Nguyen Hoai Nam, who recently took control of the company set to acquire more than 95% of the manufacturing business. Nam also serves on the board of Vincom Retail, formerly Vingroup’s shopping mall division.
Days before the factory transaction became public, Nam acquired majority control of Future Investment and Trading Development (FIRD), a company previously owned by Vingroup and Vuong before being separated from VinFast. FIRD holds patents related to VinFast’s first-generation electric vehicles and has registered capital worth $4.6 billion.
Analysts questioned why FIRD became the lead buyer shortly after the ownership changes. VinFast stated that it was not directly involved in those transactions and therefore could not comment on them.
Complex Transaction Structure Draws Attention
The structure of the factory deal has also attracted scrutiny. Initially, the manufacturing business will be acquired by Vuong, FIRD and another company, Ngoc Quy Investment and Trading Development. Ownership will later be reshuffled again before completion, scheduled for September.
Once finalised, FIRD will control 95.5% of the manufacturing business, while Vuong will retain less than 5%, according to regulatory filings. Ngoc Quy Investment will ultimately not hold a stake, despite participating in the initial phase of the transaction.
The temporary involvement of Ngoc Quy Investment has prompted further questions from governance observers. The real estate company declined to comment, although filings show some shareholders have business ties with Vuong.
VinFast Keeps Overseas Operations
VinFast will continue to retain its assembly plants in Indonesia and India, along with patents covering its newest generation of electric vehicles.
Since the restructuring announcement on May 12, VinFast shares have fallen roughly 12%. Vingroup remains tightly controlled by Vuong and lacks major institutional shareholders.
Foreign investment firm Dragon Capital, one of the few international investors in Vingroup, did not respond to requests for comment.
Foxconn Interest Resurfaces
Industry analysts believe outsourcing manufacturing could help a smaller EV maker like VinFast focus resources on software development and technology improvements instead of capital-intensive factory operations.
Under the agreement, the new factory owners will also have the ability to manufacture vehicles and batteries for third-party clients.
Some market observers believe another manufacturing partner may eventually emerge through the new investor group. In 2021, Taiwanese contract manufacturing giant Foxconn approached Vingroup regarding VinFast’s production lines, although no agreement was reached.
When asked about potential new discussions with Foxconn or other manufacturers, Vingroup said it had no plans to sell VinFast’s Vietnamese manufacturing facilities to any original equipment manufacturer.
With inputs from Reuters