This $17,000 Hatchback From Vietnam Comes at a Cost: No Profit

(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 JSC’s auto unit, said in an interview at the Bloomberg Asean Business Summit in Bangkok on Friday.

VinFast marked the rollout 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 Corp., Ford Motor Co. and Honda Motor Co. -- the company is offering its first line of cars at cost, Thuy said.

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

Its first batch of cars include a hatchback named Fadil, which sells for 394.9 million dong ($16,950), a sedan priced at 990 million dong and a sports utility vehicle that goes for 1.415 billion dong.

“We started the company with the domestic market in mind,” said Thuy, who is also Vingroup’s vice chairwoman. “We see very low car penetration in Vietnam right now. It’s 10% 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% in May from a year ago, according to data from Vietnam Automobile Manufacturers’ Association.

--With assistance from Suttinee Yuvejwattana and Margo Towie.

To contact the reporters on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net;Nguyen Xuan Quynh in Hanoi at xnguyen20@bloomberg.net

To contact the editors responsible for this story: John Boudreau at jboudreau3@bloomberg.net, Ville Heiskanen

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