Vietnam to make own cars; Vingroup to invest $3.5 billion

Bloomberg

Vietnam wants to design and make cars for its 90 million motorbike and scooter riders.
The country’s largest real-estate company Vingroup JSC said it plans to invest up to $3.5 billion to set up a manufacturing and research and development complex, aiming to roll out the first car in 24 months. The Hanoi-based developer will break ground on the $1 billion to $1.5 billion first phase of the plant on Saturday, with a plan to make sedans, sport utility vehicles and electric cars in the future, Vingroup Vice Chairwoman Le Thi Thu Thuy said.
“We want to create an affordable and high-quality car for Vietnamese,” Thuy said.
Vingroup has signed a memorandum of understanding with a major investment bank regarding a potential loan for as much as $800 million, though it plans to fund most of the project itself, she said.
Vietnam’s ambitions are similar to efforts by companies in China and Malaysia, which have also tried to create cheaper, local brands to woo consumers in a region where foreign brands including Toyota Motor Corp. and Volkswagen AG have had years of dominance. Vingroup will face the same challenges as Chinese automakers, which have struggled to win over buyers in the world’s biggest vehicle market, said Steve Man, a Hong Kong-based automobile industry analyst for Bloomberg Intelligence.

Italian Design
Vingroup plans to fund most of the new company, called VINFAST, by itself, Thuy said. The company will appoint an executive from a global automaker to be the car company’s chief executive officer. It wants to use Italian design houses and will rely on US and European companies to help produce main components such as engines, she said.
Vingroup, which began as a real estate company, is now a conglomerate with seven core units, including the new automobile business. Vincom Retail, a Vingroup subsidiary backed by Warburg Pincus, is planning a domestic initial public offering that could become the country’s biggest-ever share sale from the private sector. The mall operator is preparing to raise funds as economic growth in Vietnam raises living standards and increases shoppers’ disposable incomes.
The car project is going to be a “very difficult” challenge, said Michel Tosto, head of institutional sales and brokerage at Viet Capital Securities JSC. The company should rather seek a venture with a foreign automaker, he said. “It doesn’t have the expertise nor the capital for that,” Tosto said. “It’s a competitive space dominated by foreign brands.”