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VinFast gets $3.4 billion in funding from Vingroup and founder Vuong to fuel growth

Electric vehicle maker VinFast, listed on Nasdaq, is poised to receive a huge boost in cash infusion. A second injection of funding worth 85 trillion dong will go to the company from its founder Pham Nhat Vuong and its parent company, Vingroup, in its bid to break even by 2026.

According to Reuters, VinFast has been fast-growing in global markets since its inception in 2017 and the expansion is highly North America-focused. Unfortunately, the company has been incurring more losses partly from softer demand for EVs as well as other conditions within the market. To overcome those pressures, the company plans to use new funding to spur further growth and stabilize operations.

This will be a huge chunk of the amount, estimated at $3.35 billion. Vuong is likely to pay around 50 trillion dong ($1.97 billion). Vingroup, Vietnam's largest conglomerate, plans to lend VinFast up to $1.38 billion by 2026-end. The funds will be sourced through the company's operations, dividend pay-outs, and perhaps a divestment if required.

Furthermore, Vingroup will convert existing loans of VinFast Vietnam into preferred stocks. These will give VinFast the right to dividends and would, therefore, provide increased financial flexibility.

The billionaire founder and owner of VinFast, Pham Nhat Vuong holds 97.9% of the shares. To better allay such investors' fears, he assured people that he is for the long term with the EV maker. He also revealed that if the independent fundraising by VinFast failed to raise the amount needed, funding from the existing investors would be used.

The investment round brings the total capital injection into VinFast to nearly $17 billion. Before that, Vingroup and Vuong had already contributed $13.5 billion in capital. But all this appears to have failed as VinFast recently reported a net loss of $773.5 million in the second quarter, which was a 27% increase from the previous quarter.

Along with VinFast's woes with the manufacturing projects, in July, the company delayed a $2 billion EV manufacturing complex in North Carolina by several years until 2028 amid rapidly changing market conditions.

As VinFast considers its future, the new funding from Vingroup and Vuong would be a decisive factor in helping the EV manufacturer recover financially as well as build towards profitability within the competitive global market.