Selling below cost

TMT Auto Corporation (HoSE-TMT) has just announced its consolidated financial report for the third quarter of 2024 with a loss of nearly VND 93 billion compared to a profit of more than VND 140 million in the same period last year.

In the first 9 months, TMT lost nearly 192 billion VND, compared to a profit of more than 2.4 billion VND in the same period. This loss is equal to about 52% of the company's charter capital.

Previously, TMT had made losses in the second and fourth quarters of 2023 and the second quarter of 2024, as well as making very little profit in other quarters.

In the first quarter of 2024, TMT's profit was less than 270 million VND, equivalent to the price of a Wuling electric car.

According to the explanation, objectively, TMT Auto Corporation suffered losses in the third quarter of 2024 due to "general economic difficulties, frozen real estate, inflation risks, people tightening spending..." causing car consumption to decrease sharply.

Subjectively, it is due to "high financial costs over the past many years due to large inventories, thereby generating many additional costs in production and business.

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Wuling Hongguang MiniEV. Photo: TMT

In fact, the financial report shows that TMT - chaired by Mr. Bui Van Huu - sold goods below cost price, thereby causing negative gross profit.

Specifically, in the third quarter of 2024, TMT recorded net revenue from sales and service provision of more than 352 billion VND, but the cost of goods sold was up to more than 393 billion VND. Thus, TMT had a gross loss, not including financial expenses, sales expenses, business management expenses and other expenses and taxes...

In the first 9 months, TMT also sold goods below cost price, with net revenue of more than VND 1,675 billion, while the cost of goods sold was more than VND 1,707 billion, thereby causing negative gross profit.

Selling Chinese electric cars is difficult

TMT has been facing difficulties for the past two years amid a general decline in car consumption. TMT's business activities also declined sharply after the business plan for the low-cost Chinese electric car model Wuling Hongguang MiniEV did not meet expectations.

Not only is the economy struggling and demand weak, TMT is also stuck with the famous small electric car model in China, Wuling Hongguang MiniEV, produced by the joint venture General Motors (USA) - SAIC (China) - Wuling (China).

Wuling was the world's best-selling small car model for 4 consecutive years (2020-2023). TMT sells this car for only 239 million VND/car but sales are very low. At times, Wuling is also discounted by tens of millions of VND.

However, Wuling car sales have been slow. In 2023, TMT sold only 591 Wuling HongGuang MiniEV electric cars, much lower than the plan to sell more than 5,500 units.

In 2024, TMT aims to sell 1,016 electric vehicles.

It can be seen that TMT's electric car sales are not effective while the company has to spend a lot of money to distribute this car line in Vietnam.

TMT Motors operates mainly in the field of manufacturing, assembling and trading automobiles and spare parts of all kinds. The company is known for many famous truck products such as Cuu Long, Tata, Howo, Sinotruk tractors,... with large loads.

In 2014-2017, TMT recorded high profits of VND64 billion, VND187 billion, VND48 billion and over VND11 billion, respectively. In 2021 and 2022, TMT also reported profits of over VND41 billion and over VND48 billion.

Mr. Bui Van Huu's business started facing difficulties in 2023. This was also the time when TMT made a splash when entering the electric vehicle market by manufacturing, assembling and distributing the Wuling Hongguang MiniEV electric vehicle model in the Vietnamese market.

However, the results have not matched the ambition. Competition in the market is increasingly fierce as VinFast (VFS) of billionaire Pham Nhat Vuong has pushed a large number of electric vehicles to the market, while at the same time, many big players such as China's BYD have also joined.

In 2024, TMT Motors aims to achieve net revenue of VND 2,645 billion and after-tax profit of more than VND 38.5 billion. TMT plans to sell assets and cut staff to maintain operations; at the same time, accelerate restructuring from products, suppliers, to the entire production and business activities.

The reason for the loss is also due to TMT's push to clear inventory with the goal of more sustainable development.

Previously, the auditor emphasized the issue of accumulated losses and the fact that TMT's short-term debt exceeded its short-term assets by hundreds of billions of dong, showing the existence of a material uncertainty that could lead to doubts about the company's ability to continue operating.

TMT said: Regarding electric vehicles, the company has agreed with foreign partners to choose products suitable for the Vietnamese market, especially agreeing on highly competitive prices to serve the increasing needs of consumers.

The world's largest electric car company is about to enter Vietnam: 90% sold domestically, surpassing Elon Musk's Tesla . Chinese electric car giant BYD will enter Vietnam from June. Although it has surpassed billionaire Elon Musk's Tesla, with nearly 90% of its sales in its home country, the world's largest electric car company faces many difficulties in the foreign market.