Warnings over previous Made in Vietnam car failure

Director of Xuan Kien Automobile Joint Stock Company (Vinaxuki) Bui Ngoc Huyen claims the failure of Made in Vietnam cars was particularly due to capital difficulties.

Huyen said that he carried out research on Made in Vietnam car production and they had been highly appreciated by the National Council for Science and Technology Policy. After that, he implemented the project in line with the research.

Due to the impact of the global economic crisis during the 2010-2012 period, the company had to pay high-interest rates for loans in the context of a sluggish local car market. In 2011, banks urged Vinaxuki to sell their factory to repay its loans.

Then when the domestic car market recovered, Vinaxuki faced strong competition from other producers and importers. Huyen also blamed his firm’s failure for the trend of preferring foreign products among local customers. Instead of supporting and encouraging the new product, many of them criticised and ignored the local brand.

He said if he had been offered USD400 million, he would have produced Vietnamese cars successfully and the engines could have been made in Vietnam, he said with regret.

Construction of the 12-hectare million Vinaxuki car plant was kicked off in early 2004. The plant started operation in August 2005 with an output capacity of 20,000 units per year.

During the 2006-2011 period, the factory operated with profit and manufactured 20 trucks (models) and three car models at the localization rates of 27 and 5%, respectively.

However, in 2012, Vinaxuki had to shoulder losses for the first time and was unable to repay VND45 billion (USD2.03 million) to banks. In early 2013, Vinaxuki’s factory and its facilities in the central province of Thanh Hoa and the Central Highlands province of Dac Nong were forced to suspend operations due to financial problems.

By the end of 2014, Vinaxuki owed large banks, including BIDV and Vietcombank, a total of VND1.6 trillion (USD73.4 million). The factory and its assets, such as machinery and land-use rights, had been mortgaged to take loans from other banks.

Huyen recently submitted appeal to the prime minister to ask for help to save the plant.

Huyen proposed the PM approve Vinaxuki’s investment capital restructuring plan and allow the factory to borrow even more money, an additional VND200 billion (USD9 million) to maintain operations and pay salary for its employees.

Regarding Vingroup’s newly-announced USD1.5-billion project to produce Made in Vietnam cars, Huyen forecasted that it would be successful as it now has much more favourable conditions than Vinaxuki.

Vingroup has a strong financial capacity, while it also signed a memorandum of understanding with Credit Suisse AG over an USD800 million loan for its electric vehicles and motorbike manufacturing complex.

Vingroup’s Vinfast is located at Dinh Vu-Cat Hai Economic Zone in Haiphong City where is home to the developed infrastructure system. The group has also been offered land priorities for the project.

The Vietnamese auto market has become much better than some years ago with more support from the government through preferential loans.

“I believe that they will be successful and they should be supported,” Huyen said.

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