Billionaire-led Vietnamese conglomerate Vingroup reported a 60% drop in earnings in the first half of the year, after relinquishing control of its major retail chain to focus more on its motor vehicle and smartphone businesses.
Vingroup’s profit after taxes came in at $58.3 million, while group revenue fell 37% in the same period to $1.67 billion, a company spokesperson said Tuesday.
In December, two divisions of Vingroup merged with the Vietnamese retail giant Masan Consumer Holding. Through that deal, Vingroup handed Masan control of its 2,600 VinMart and VinMart+ stores so it could commit more resources to manufacturing motor vehicles and smartphones, the spokesperson says.
Vingroup’s manufacturing units took in revenue of $266 million over the first half of 2020, three times that of the same period last year, as cars and phones began reaching consumers, the spokesperson says.
Sales of cars produced by Vingroup automotive subsidiary VinFast led the manufacturing surge after it started selling cars from June last year. “VinFast is a large proportion of Vingroup,” the spokesperson says. “The reason for the increase in manufacturing revenue is that…VinFast began delivering cars to customers.”
VinFast accepted more than 67,000 vehicle orders last year, 50,000 of those for electric motorcycles, domestic news website Vietnam Net Global reports. Sales had reached 5,000 in the first quarter this year, fifth highest of any automaker in Vietnam, the news outlet says. The Covid-19 crisis including a month of shutdowns hit Vietnam mainly in the second quarter.
The Hanoi-based conglomerate with total 2019 revenue of about $5.5 billion is chaired by Vietnam’s richest person, Pham Nhat Vuong, who has an estimated net worth of $5.7 billion. Other units of Vingroup operate malls, resorts, real estate, automotive production and a university.
VinFast also began production of cars in June last year, after moving the schedule up from September, the subsidiary says on its website.
“In the first six months of 2019, due to not delivering cars to customers and (because) revenue from the smartphone segment was not significant, the manufacturing revenue is not high then as the first half this year,” the spokesperson says.
Smartphones developed by Vingroup subsidiary VinSmart are starting to gain traction in the domestic market as well. Phones under its Vsmart brand command a 16.7% domestic market share, in third place after Samsung and Oppo. VinSmart announced a 5G smartphone last month.
Vingroup’s manufacturing revenue will eventually show strain, especially if it depends on sales of higher-end cars, says Ralf Matthaes, founder of the Infocus Mekong Research consultancy in Ho Chi Minh City. The normally fast-growing economy all but flatlined in this year’s second quarter, which started out under anti-coronavirus shutdowns. Luxury purchases are sagging, he says, “for the simple reason that it’s something no one can afford right now.”
VinFast cars already sell for more than some imported vehicles, Matthaes says. The manufacturer is working now on a model called the VinFast President, apparently a luxury car.
Ralph Jennings, @Forbes