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 reported on Friday.
VinFast, which started to deliver cars in California last year, said it made a net loss of USD 773.5 million in the April-June period, an increase of 27% from the first quarter and 40% bigger than the same period last year.
Revenue jumped 33% quarter-on-quarter to USD 357 million but its deepening loss underscores the risks of VinFast’s aggressive expansion strategy – which could have repercussions for its parent company Vingroup.
“We are still a startup so we expect to have losses for a couple more quarters,” Thuy Le, VinFast’s chairwoman, told Reuters in an interview.
“However the industry is driven by volumes. As we increase the volumes and optimize the costs, we should be able to get to even and profitability,” she added.
Selling expenses rose by 25.5% quarter-on-quarter due to increasing sales and marketing costs, coupled with asset impairments, according to the filing.
The EV maker’s gross margin stood at negative 62.7% in the second quarter, primarily due to an impairment charge of USD 104 million on the net residual value of its vehicle inventories, up from USD 5 million in the previous quarter.
Nevertheless according to Thuy, excluding these factors, its gross margin still improved.
In July, VinFast halted its USD 2 billion manufacturing complex project in North Carolina until 2028 due to challenging market conditions. The company also reduced its delivery target for this year to 80,000 vehicles from the initially planned 100,000.
Deliveries in the first half of 2024 stood at 22,348 vehicles, well below the full-year target, and half of those deliveries were made to related parties including its taxi operating affiliate GSM mostly owned by VinFast’s founder.
VinFast has been expanding aggressively to Asian markets such as Indonesia or the Philippines to capitalize on growing demand for electric vehicles in those regions and offset softer demand in the United States.
However, the company is betting on home market Vietnam for the remainder of the year, with deliveries of its mini SUV VF 3 and city model VF 5.
“We are confident about the 80,000 deliveries guidance for this year with most of the sales driven by the Vietnam market,” Thuy said, adding the EV maker got more orders for the VF 3 than it could fulfil and could only deliver 20,000 units this year.
Shares of VinFast fell 2.02% to USD 3.88 apiece in pre-market trade on Nasdaq on Friday. The shares have dropped more than 50% since January.
