In addition to welcoming the wave of investment transformation, the new business segment is also a step to create momentum for VinFast, with the expectation of developing an supporting industry network.
Industrial park real estate is becoming a “parallel” name with Vingroup, when this group has made clear moves. The subsidiary in charge of this segment was increased its capital from 70 billion to 6,000 billion. In early April, Vinhomes IZ proposed to invest in infrastructure of Thuy Nguyen Industrial Park (Hai Phong) on an area of 319 hectares, with a total capital of more than 4,000 billion.
At the annual meeting held last week, leaders of Vingroup and Vinhomes explained that the investment decision is to take advantage of opportunities from macro conditions and foreign direct investment (FDI) trends. “Vingroup determines that industrial real estate will be the main and important business segment in the future because this field brings regular cash flow,” said Pham Nhat Vuong, Chairman of Vingroup’s Board of Directors.
However, catching the investment wave may be only half the story. The decision to develop industrial park real estate also brought with it Vingroup’s calculations about expanding the ecosystem for the manufacturing segment with the ambition to go faster. Nguyen Dieu Linh, Chairman of the Board of Directors of Vinhomes, said that the initial target customers of the industrial park real estate segment will be units in the supply chain of auto parts, aiming to create a ecology surrounding VinFast both in terms of production factors and geography.
The development of auxiliary technology industry has been the passion of the automobile industry for more than two decades of development. The rate of car localization in Vietnam so far has averaged 7-10%, while Thailand has reached 80%. According to the Ministry of Industry and Trade, the domestic auto industry has not mastered core technologies, while local products are mostly low-tech content such as tubes, tires, seats, mirrors, and frames. shell, glass…
The absence of large ancillary enterprises, lack of cohesion in the supply chain, made the big names in the previous industry such as Thaco or TC Motor only in the form of “assembled”, while the first manufacturers, such as Vinaxuki, had exit the market at a loss. But VinFast, which Vingroup has identified as a focus in the future, can change this reality, especially with its industrial park development strategy.
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Vingroup, after building the factory, has pulled big names in the supporting industry such as ZF, Lear, Faurecia, Antolin, Aapico, LG Chem, VinFast – An Phat, Nexmo, Namyang to the VinFast complex in Hai Phong.
“In the immediate future, we will look for tenants in the industrial zone segment who are units in the supply chain for VinFast, then will expand to other objects,” said Vinhomes Chairman.
The establishment of a separate management unit creates more clarity in the business model. VinFast complex will be converted to industrial park real estate managed by Vinhomes and VinFast becomes one of the first tenants. The separation between real estate and production also avoids the overlap in management at VinFast, and at the same time, creates an appropriate investment attraction system.
Vinhomes leaders said that VinFast will not receive any special incentives. “If VinFast is given incentives, other companies will also be able to do the same,” Linh affirmed. Instead, initially, Vinhomes will offer attractive price policies to attract tenants.
Mr. Pham Nhat Vuong believes that industrial park real estate will bring regular cash flow. This is necessary, if viewed from the Covid-19 situation, a business segment that is capable of spreading risks and aiming for stable sources of income becomes even more important.
The outbreak of the disease has impacted many business activities, but the heaviest is tourism and resort. For Vingroup, the biggest influence is Vinpearl’s activities. In the first three months of the year, this division recorded a revenue of more than 1,800 billion dong, but a pre-tax loss of nearly 1,700 billion dong. In contrast, industrial park real estate is considered a “rising star” despite the epidemic.
Covid-19 disrupting supply chains in China has made investors more interested in plans to expand, set up branches or production facilities in other markets, including Vietnam.
According to a representative of Savills Vietnam, moving a part of production facilities out of China as a method of risk insurance for multinational companies. Besides, the geographical location near China also makes it easy for investors to add production facilities but still do not need to give up this market of 1.4 billion people. Google, Microsoft and even Apple are showing the first steps in the wave of mobility.
Investing in a period of increasing demand will help Vingroup quickly fill projects. Meanwhile, big investment decisions are often accompanied by a long-term vision, which will bring a stable and lasting income.
A representative of Vinhomes said the goal is that the industrial park real estate segment will contribute about 10% of total revenue. According to the revenue plan in 2020, this segment can bring in VND 14,000-15,000 billion in the future. This figure is only behind the revenue of the real estate business and the divested retail segment.