VinFast Auto Q2 2023 Earnings Call Transcript

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Provided by Quartr
September 21, 2023

There are 8 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to VinFast Second Quarter 2023 Financial Results Webcast Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please Be advised that today's conference is being recorded. I would now like to hand the conference over to Ms.

Operator

Carol Yuan, Head of IR. Please go ahead.

Speaker 1

Thank you everyone for joining our first earnings call as a public company. Before I turn it over to Thuy, let me remind you that Some of the statements on this call include forward looking statements under federal securities law. These include, without limitation, Statements regarding the future financial performance of the company, delivery volumes, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives and other future events. These statements are based on the predictions and expectations as of today, and Actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC.

Speaker 1

In addition, management will make reference to non GAAP financial measures during this call. A discussion of why we use non GAAP financial measures Information regarding reconciliation of our GAAP versus non GAAP results is available in our earnings press release issued earlier this morning as well as in the investor deck.

Speaker 2

We are excited to welcome everyone to VinFast's first earnings call. Thank you for joining us. Before I detail some of our recent milestones, I wanted to reiterate our business and mission. VinFast was founded In 2017, with the goal of emerging as a leader in the future of smart mobility through our intelligent, thoughtful and inclusive Full scale mobility platform focused primarily on designing and manufacturing premium EVs, electric scooter and electric buses. I'm proud to have had spearhead the formation of VinFast and lead the execution of our strategy from the outset, Delivering our first vehicle less than 2 years later.

Speaker 2

We are excited by what We see as a tremendous global opportunity, especially in the EV space and believe we are uniquely able to differentiate our We have established our operational facilities, including sales network in Vietnam, North America and Europe and moving forward, we plan to expand our coverage to Asia Pacific, Middle East and other potential markets globally. We benefit from highly automated manufacturing capabilities and an integrated supply chain. We are backed by the support and resources of Vingroup, Vietnam's largest private conglomerate and our Chairman, And our public listing in the U. S. Provides WinFast with additional sources of capital and better position us to achieve our mission of creating a greener future for everyone.

Speaker 2

In August, Linfast became a U. S. Listed company on the NASDAQ Stock Exchange following the completion of our business combination with This was a proud moment for me and for the entire WinFast team, marking a significant milestone in the company's global expansion and reflecting a powerful vote of confidence in our vision. We broke ground on a new manufacturing site in North Carolina, signifying our commitment to global expansion and developing our diversified supply chain in North America. The project is the single largest investment by a Vietnamese company into America.

Speaker 2

It also marks the largest economic development initiative in North Carolina's history. The facility is targeted for commissioning in 2025 with an expected annual capacity of 150,000 vehicles per year in Phase 1. We enter into a capital funding agreement with Vingroup and its Founder, Chairman of fab network, who committed another $2,500,000,000 in funding to help accelerate WinFast growth. We continue to deliver our sophisticated vehicles to markets around the world, most notably continuing to bring the VF8 model to the U. S.

Speaker 2

We have worked with our globally recognized design partners, primarily Pune Farina, During the 75 days of electric mobility exhibition We held throughout Vietnam. We introduced the VF3, a 2 door mini electric car model designed specifically for the Vietnam market. Boasting a compact and contemporary design, The VF3 drew significant interest as it offers numerous benefits, making it suitable for a wide range of applications and operating environment. GSM, The first Vietnamese EV Taxi operator and an affiliate of BinFast officially launched in Hanoi and Ho Chi Minh City. VinFast entered into vehicle sales agreement with GSM for up to 200,000 e scooters and 30,000 EVs including the VF-eight, VF-thirty four and VF-five.

Speaker 2

We continue to expand our global footprint. By the end of Q2, Binfast had 245 showrooms and workshop for e scooter and 122 showrooms globally for electric vehicles. I would like also to spend some time providing an overview of our near term priorities. We have ambitious plans to deliver 7 models in Vietnam, North America, Europe In Asia over 2023 2024, such as delivering the VF9 in North America by the end of the year, as well as targeting 1st delivery of the VX6 later this year and the VX7 and the VF3 in 2024. We are focused on building our production capabilities in North Carolina to better position us to serve the North American market.

Speaker 2

At VinFast, we strive for continuous improvement in the quality, functionality and performance of its vehicles. And we remain committed to bring further innovation and technological enhancement to our lineup. Over the long term, we are focused on several strategic priorities To grow and enhance the business, we will expand our global footprint into 10 market clusters, where we expect high EV demand growth, Vietnam, North America, Europe, Indonesia, India and the Middle East. We have also identified between 40 50 potential markets globally to engage high quality distributors to import and distribute Vintas cash into local markets starting from 2024. We will further expand our global manufacturing capability through investment in technology, Infrastructure and equipment to add volume within our existing facility in Hai Farm as well as opening an additional factory in the U.

Speaker 2

S, Indonesia and other potential markets to utilize our global supply chain. We will continue to focus on automotive Technology through our in house R and D and external partnerships continuously providing over the air software updates and improvement to make our vehicles smarter and more reliable for our customers. We will build Our customer centric mindset through our extensive services. We intend to rapidly expand our sales network globally. We are partnering with dealers and distributors, while simultaneously driving cooperation with international ride hailing companies, including GSM.

Speaker 2

In conclusion, we are proud of our accomplishments this quarter and look forward to a bright and greener future together. With that, I would like to turn the call over to David, who will discuss our financial performance for the quarter. David?

Speaker 3

Thank you, Madame Thuy. I also want to express How excited I am to be speaking with everyone in our inaugural earnings call. And now our Q2 2023 results by the numbers. We delivered 9,535 EV vehicles, reflecting a staggering fivefold increase from Q1 2023. The significant growth of EB sales was driven by deliveries of VFV34, VF8 and VF9 and the launch of the VF5.

Speaker 3

We recorded revenue of $334,000,000 translating to over 4 fold increase quarter on quarter predominantly through sales in Vietnam. The Q2 of 2022 does not include revenue from the VF8 and VF9, and the Q1 of 2023 does not include VF5 sales since we commenced delivery of those models in Vietnam in September of 2022, March 2023 April This increase was partially offset by a decrease in the number of ICE vehicle sales volume as a result of our phasing out our production of ICE vehicles in furtherance of our plan to fully transform into a pure EV player And also a decrease in sales of e scooters, which was attributable to a decline in the sales volume of our older e scooter models. We had a considerable improvement in profitability. We realized a gross profit of negative $114,000,000 and EBITDA of negative $350,000,000 translating to a 22% 18% improvement quarter on Our operating expenses decreased by $43,000,000 quarter over quarter, thanks to lower R and D expense Following an extensive period of investment to SOP and product launches, CapEx was flat As spending normalized after a period of investment in our production facilities, we had a period of much stronger cash flow.

Speaker 3

Cash from operating activities was negative $85,000,000 a substantial improvement from negative $800,000,000 in Q1. On the operations side, we added 10 new showrooms primarily in Europe and 21,000 charging points while having ongoing discussions with other North American charging network operators. In terms of guidance, Q2 results met our expectation. And for the year, we are still targeting 40,000 to 50,000 overall deliveries. We expect CapEx to remain at the current level for 2023 to 2024.

Speaker 3

Proceeds from the DiceBank and the strategic investor, coupled with funding support from the Chairman and VIN Group, gives us sufficient runway to grow in the coming years. We also continue to look for opportunities to strengthen our balance sheet. We remain on track to deliver the VF9 in North America and the VF6 in Vietnam by the end of this year. And we are excited for the VF7 and VF3 to begin deliveries in 2024. With that, I will turn it over to Thuy for closing remarks And the operator to open our Q and A session.

Speaker 2

As mentioned earlier, we are excited by the tremendous opportunity in front of us. We are driven by execution excellence in everything we do and combine passion, speed, And forward thinking to our organization to achieve our mission of providing everyone with easy access To smart, safe and environmentally friendly electric vehicles to achieve sustainable mobility at the global scale. We have accomplished a great deal in our short history and believe we are well positioned to deliver on our strategic goals through several key business strength and initiatives. We look forward to keeping you updated on our progress and maintaining regular dialogue. Thank you again for all your ongoing support thus far.

Speaker 2

Now I would like to turn over to the operator for the Q and A session.

Operator

Please standby while we compile the Q and A roster. Our first question comes from the line of Brian Dobson from Chardan Capital Markets. Please ask your question, Brian.

Speaker 4

Hi, good morning. Thanks for taking my question.

Speaker 2

We can't hear you, Vern.

Speaker 4

Can you hear me now?

Speaker 2

Yes, better. Hello? Yes, any better.

Speaker 4

Good. So thanks for taking my question. You've identified Indonesia as a key potential market.

Speaker 3

Do you think that

Speaker 4

you could elaborate on some of the long term

Speaker 2

Let me take that question. So we and if you look at the demographics of Indonesia, there are 280,000,000 people In Indonesia, each year there's about 2,000,000 passenger vehicles produced and half of it is for consumption In Indonesia and the other half is for export. Each year, there's about 5,000,000 to 7,000,000 motorbikes That have been consumed. So the consumption in the country is alone is a lot. Also, we going into Indonesia, The government is open and there are some tax benefits that we can take advantage of that will allow us To be competitive in Indonesia.

Speaker 2

And finally, we are going into Indonesia together with our battery Company as well to take advantage of the battery ecosystem that is coming together in Indonesia right now. So we see a lot of potential in Indonesia.

Speaker 4

Excellent. Thank you. And then as a follow-up, in light of the recent UAW strike and the How do you view manufacturing in the United States? Do you believe the positioning of your factory in North And how did you decide to locate your factory there?

Speaker 2

So we started looking for manufacturing sites in the U. S. From end of 2021 before IIA. And There's a lot of criteria. There's a long list of criteria and we're looking for a big site for expansion, Not only for VINFAS, but also for VINAX for the battery as well as the supplier pack.

Speaker 2

So We shortlisted the list and there were 3 sites and North Carolina is one of them.

Speaker 4

All right. And I guess to expand upon that, would you expect labor costs to rise in the United States over the next few years?

Speaker 2

Right now, it looks I think it looks higher than what we had In our model before, but however, with the IAA and the tax benefit that we can benefit from that our customer can benefit. It still makes sense to manufacture in the U. S.

Speaker 4

Yes, very good. Thank you very much and congratulations on your Q1 out of the gate.

Speaker 2

Thank you.

Speaker 1

Hi. Our next call is from our web online webcast How many B2B units in the 26,000 EV unit reservations as of end Q2 2023, how many cars have you delivered as of the end of August 2023, of which how many to the U. S? What is your guidance on car delivery in the first half of twenty twenty three excuse me, what is your guidance on car delivery in the second half 2020 2024, which models are the main drivers?

Speaker 3

Hi, Carl. Yes, let me take those questions. It's Dave here. So I think we've already provided guidance on the earnings release for the entirety of 2023 between 40000 and 50000 units. So if you take the first half deliveries of 9,500, you can imply significant up Actually to manage and deliver those numbers, we're very excited about prospects for the business.

Speaker 3

Now we aren't providing A breakdown on those deliveries at a model or a country level that's not unusual, and we're Copying and following our period guidance in terms of the level of detail that we will provide and the cadence over which we provided. Of the reservation numbers quoted up until the end of Q2, actually all of those reservation numbers Are related to individuals or retail reservations. Our B2B discussions are separate from that And would be in addition to those numbers based on different discussions that we're having with higher car companies, fleet operators and other kinds of shared mobility operators in different jurisdictions. What we have obviously disclosed It is our commitments and our arrangements with GreenSmart Mobility, the Vietnamese e taxi operator. We're very excited about expecting to deliver up to 30,000 EVs and up to 200,000 e scooters To GSM over the course of 2024 and to 2025.

Speaker 3

I hope that addresses that question.

Speaker 1

Thank you, David. The next question is, How many car sales do you need to EBITDA breakeven for the current Haiphong factory and upcoming U. S. Factory? At that breakeven level, How many percent is that from the Vietnamese domestic car sales?

Speaker 1

More further reason why to build a CKD facility in the Indonesian market in terms of labor cost and tax incentive?

Speaker 3

Sure. Let me take that question as well. Now again, we're not providing exact numbers on What we need to produce in order to breakeven in either location and again that's not unusual for company in our position. Obviously, breakeven from both a top line and an EBITDA basis is really a function of So many different variables that we can't predict at the moment that it's not possible to project that number. But as a ballpark, We think that the company can be breakeven profitable and we're producing north of 200,000 vehicles for sale Depending on the composition of those vehicles, we've obviously opened the dialogue and outlined our investment Plans in Indonesia as an additional ideal source for a manufacturing facility, a CKD manufacturing facility In that part of the world, I think, Matti Tuis has already outlined the rationale for that, which includes items such as the total market Opportunity there, labor cost is indeed a factor and an attractive one as our access To underlying raw materials and key EV raw material sources and other government incentives

Operator

We have a question from the telephone line. Next question comes from George Genericus from Canaccord Genuity, please ask your question.

Speaker 3

Hi, everyone, and thank you

Speaker 5

for taking my question, And congrats on your Q1 out. My question is more long term oriented. I'm curious as to whether you could share your thoughts On the proper level of vertical integration at FinFAST, when you're balancing things like margins, Supply chains, internal employee counts, what are the things that you think over time you want to bring

Speaker 2

Let me take that question. So if we look at Vintas right now, we're quite vertically integrated At our factory, a lot of it has to do with strategically, we wanted to be To develop and manufacture components that are important to EVs like the e motor, like You know, even battery or a lot of other components like the MHU in the vehicle. So that was strategic. Some of the reason was because Of the COVID time and the disruption in the supply chain, so we ended up making those components. So, but all in all, VINFAS is quite Vertically integrated right now.

Speaker 2

I think that the decision is driven by the cost and the long term strategy of the company. So we might be a little bit different when you come to the U. S. Plant as well as Indonesia Plant.

Operator

Do you have any follow-up, George?

Speaker 3

Thank you for your time. That will be all. Congrats.

Speaker 2

Thank you, George. Thanks. Thank you. We'll be

Operator

taking our next question from the line of Laura Lee from Deutsche Bank. Please ask your question, Laura.

Speaker 6

Hi. Congratulations on the successful we've gained in the Q1. And what we can see is that engaging such an exciting but competitive industry, especially in the United States. So My first question will be, what's your thoughts on the competitive landscape and what's the unique advantages that enables you to stand out? And my second question is about your sales model in the States.

Speaker 6

Are you considering partnering with the dealers? And

Speaker 2

Can you repeat the second question about the sales model?

Speaker 6

Yes. Are you considering partnering with some dealers?

Speaker 2

Okay. I got it. Okay. Let me take this question then. About the competitive landscape and our How we stand out?

Speaker 2

I think we first of all, we're the only one I think that has the whole lineup of Vehicle, EV from the MINI, the VF3 all the way to full size 3 row SUV, the VF9. And 4 of them are already on the market. 2 are coming pretty soon and we have 3 coming towards the end of next year. So having the vehicle I mean, our mission is to make EV accessible to everyone, meaning to all different segments. So having the vehicles in all different segments It's powerful.

Speaker 2

We our cost base is Very low compared to other OEMs in Vietnam, compared to other OEMs in other locations. And another thing is we do have support from our parent company, Green Group, And our Chairman. So not only the financial support, but all that other types of support from a big group that Very familiar, I have 3 listed companies and very familiar with running a list of companies. So we all in all, we think that we have A lot of advantages and especially the whole market is moving to electrification. So we're not Fighting for a shrinking pie per se, but we are just going following the trend.

Speaker 2

On your second question about the sales model, as announced earlier, we are Pivoting into the dealership model as well. So right now, we're talking with multiple dealers In all different states in the U. S. Right now, and we should be able to announce pretty soon. Thank you.

Speaker 1

Hi. Our next question is from the webcast. Of the 40,000 to 50,000 target deliveries for this year, how many of these EVs will be sold to GSM in Vietnam? Can you also break down the expected deliveries across Vietnam, the U. S, Canada and Europe?

Speaker 1

What's driving the demand for VinFast cards outside Of the GSM deliveries, which is an affiliate of InBash, is there any indication whether the recall then may have impacted demand

Speaker 3

So let me take some of those questions. Thanks, Carol. So I guess firstly, In terms of the GSM deliveries, the numbers that we have disclosed are of the 11,300 vehicle deliveries to us In the first half, about 7,100 have been delivered to GSM. That's a mixture of VF8, VF34 And VF5. And this is part of our strategy to really expand experience of EVs in Vietnam For the Vietnamese people who haven't got the experience of direct EV ownership, it's important for us to make sure that we're getting as many People driving the e taxis and passengers and experiencing the EVs as possible.

Speaker 3

So it's a core part of our strategy and will continue to be for the next Several quarters until we've completed the GSM deliveries. As with some of the other guidance, we will not provide detail In terms of avenues and channels of sale or model and that is normal for a company in our position, which is following our peers in that regard. In terms of some of the international markets and the deliveries, I think really we're just getting started. So I think that we outlined the time frame around delivery of vehicles to the European markets later this year. So that's Very exciting that we begin deliveries to UHOF and we're also just really getting started on the delivery of vehicles into Canada And the U.

Speaker 3

S. As well, and you'll start to see an uptick of deliveries in Q3, substantial uptick in Q3 numbers versus The prior Q1 and Q2 numbers, I think there was a part of the question that asked about recalls and its impact. And really out of an abundance of caution, what we did was we identified issues with some of the software in the car And proactively engaged and we call those vehicles to make sure that they're the highest quality as we were Delivering the vehicles to customers. So we haven't had a large number of deliveries today, but that will significantly Ramp up in Q3 and Q4 for that reason. I think it's worth highlighting, of course, that the substantial number of vehicles that We have demonstrated the ability to deliver in Vietnam the strong customer following and customer brand loyalty we do have there So we expect to continue to drive ongoing brand acquisition in Vietnam.

Speaker 3

So we're very excited about prospects And all of the other market opportunities that we're opening up and sales channels that we're opening up as well.

Speaker 1

Thanks, David. Our next question is also from the webcast. What is your view on the current price war in the U. S? For example, the current price of Tesla Model X is lower than the VF9, let alone now the Model X is eligible for tax credit of $7,500 How do you decide when it is appropriate to reduce prices or add other sales incentives to increase demand Or make FinFaaS models more competitive in the U.

Speaker 1

S. What is the competitive advantage of FinFaaS EVs versus other EV

Speaker 2

Okay. Let me take this question. So we have been watching the market very carefully in each of the markets that we are in, and we've been Evaluating and adjusting our pricing accordingly. I think about the federal tax Credit of $7,500 Our cost now that we're not manufacturing in the U. S, our customer are not Benefiting it, if they buy it outright or they get loan financing for it.

Speaker 2

However, if the customers have a lease From the bank, they can still benefit from $7,500 tax benefit. Most of our customers lease the vehicles anyway, They can still benefit from the tax benefit. We about pricing, we evaluate all the time. Our vehicles, I mean, our philosophy About our product is always a premium quality product, affordable pricing and excellent after sales service. So those are the 3 pillars that we follow in any product within Binta.

Speaker 2

Thank you.

Operator

Thank you. Next telephone question comes from the line of Dan Ives from Wedbush. Please ask your question, Dan.

Speaker 3

Yes. Thank you.

Speaker 7

My question is, how are you balancing Geographically, your build out, U. S, Europe, obviously across Asia. I mean, is there like a prioritization? I mean, that obviously becomes a high class problem. But can you just walk through that strategically?

Speaker 7

How do you make sure that you're building out your Geographic footprint?

Operator

I'll

Speaker 2

take that question then. So we might we always make pictures into We met all the countries in the world into Pretty much 2 models, 2Kai. So the second market in the model, the first model where we will Control the distribution, so like Vietnam, obviously, U. S, Indonesia, for example. So we will control the distribution in the country and we might open some Also, we definitely developed the dealership network and we might, depending on the requirements, open Factory as well.

Speaker 2

So there are certain markets that belong to this category. And then the rest of the market, the Bigger number of the markets that follow Model 2, where we select the capable distributors in the market And the distributor will not be responsible for developing such markets and having the dealers open the showrooms and servicing the vehicles. We have a roadmap of which market to enter first and why and With the resource availability within the organization as well. As you see from the history, we started out in Vietnam and very clear direction to North America and selected countries in Europe. And then only earlier this year, we started going into ASEAN, which is almost like our whole And some of the markets in the Middle East.

Speaker 2

Thank you.

Speaker 7

Great. Thank you.

Speaker 1

And our next question is from the webcast. Can you please update on the capital raising plan post VINVAS listing? Any potential divestment or capital injection from Pipe Investors?

Speaker 2

Okay. Let me take that question. We have been working on Capital raising plan for FinFAST, because the opportunity ahead of us is enormous. So we've been working on various plans. Right now, we And you've seen the F1 for the resale of about 46,000,000 shares of our Chairman who will Contribute 100% proceeds to the company.

Speaker 2

And there are few other plans

Speaker 1

Thank you, Thuy. The next question is, which year do you expect BFS to make a profit?

Speaker 2

I think we are not David, it's back. We're not allowed to provide guidance that way, but I guess we've said many times that in the next

Speaker 1

The next question is regarding manufacturing in the U. S. Since the fast cars aren't manufactured in the U. S, does that mean that BFS cannot get the tax benefit from the government? Is that statement true?

Speaker 2

I think I answered that question before. First of all, starting from 2025, we're going to start manufacturing in our North Carolina plant and then our customer will be fully Can fully benefit from the tax credit. Right now, our customer, if they buy the cash All right. Or get the loan financing on the vehicles, they won't be able to get the tax Most of our customers lease the vehicle, so most of our customers still benefit from the tax credit right now.

Speaker 1

Our next question is, can you provide an update regarding the strategic investment on Goshen of 150,000,000

Speaker 3

Yes, let me okay.

Speaker 2

Thank you. Go ahead.

Speaker 3

So yes, well, I will say yes, so we That obviously that commitment, which was done in parallel with the merger with Black Spade was A $250,000,000 commitment and subject to the approvals by Goshen to be able to make that foreign direct investment. They've been going through that process and have substantially completed the capital investment at the moment. So Yes, very positive and glad to have them as a strategic investor in the company.

Speaker 1

Thank you, David. The next question is from Igor. What is your take on the competition from Chinese EVs, Which are very competitive and also already present in Indonesia or Asian or SEAN?

Speaker 2

Let me take the question because I look at the market. We I think Needless to say, the Chinese EV companies pursuing all the markets Aggressively, and you see them in a lot of the markets. However, the EV market is expanding. So We think that there's enough room for a lot of players, not just 1 or 2 players. And the markets that we penetrate slightly different from the markets of the of some Chinese players.

Speaker 2

And I think that even in the markets like Indonesia or other Asian markets, there are room for us and for other players as well. Thank you.

Speaker 5

Okay.

Speaker 1

Yes. The next question is, Does your vehicle guidance of $40,000 to $50,000 for 2023 include e scooters?

Speaker 3

No, it does not. So that's just pure EVs across all markets. The eScooter business, we're not providing a specific guidance number on it, but we're very comfortable with that business continues to grow domestically. And we're looking at opportunities to expand it internationally as well.

Speaker 1

Hi. We just got another question. You have bought a registration document to lift lockups on some of your investors. Can you explain the reasons for this and how it would affect your funding? When do you expect the lockups

Speaker 3

Yes. Thanks, Charles. So we have made the filing. And the objective here is, As most of the people on this call are aware, the liquidity currently in the stock as it was post merger with Black Spade It was quite low and that was principally due to the large redemptions that were received from investors in the Black Spade SPAC. So the net free float and liquidity in the shares Post listing was quite low.

Speaker 3

We've obviously seen a reasonable amount of volatility in the stock. Our objectives in the short and medium term are to Increase liquidity in the stock and to raise capital for the funds and the operations of the company. So the objective is To where sales of stock are from the insiders in the company, Principally from the majority shareholders, the objective is take funds that are raised from those sales and to reinvest them back into the company to

Speaker 1

Thank you, David. Next questions are what's At this burn rate, until when will the $2,500,000,000 funding support from VIN Group and Chairman Last, considering the group's plans to build factories in the U. S. And Indonesia.

Speaker 3

Sure. So our CapEx runs at the moment at about $300,000,000 $350,000,000 per quarter, And that's principally CapEx that's devoted to the expansion of our manufacturing facilities In different locations and the development and finalization of the vehicle models. So the CapEx on that is Expected to taper off as we finalize the production and the development of the models. We've already given A timeframe around the delivery of the models into U. S.

Speaker 3

And European markets and with a finalized delivery of The full model portfolio to Vietnam in the 1st and second quarter of next year. So the CapEx will taper off. It will give us substantial runway with the funding commitments, but I won't give a specific time frame. It will be a function of other funding sources that we are

Speaker 1

Thank you, David. Next question is related to our eScooter business. Can I ask about the financials of your e scooters? Is it profitable yet? And what is the strategy going forward?

Speaker 3

So the e scooter business is slightly profitable, And we still continue to invest in it and develop new models. And obviously, as we expand capacity For the operations in manufacturing overseas, the inclusion of eScooter operations is part of what we consider in that expansion. But the strategy, we very much like the business. It's very efficient, and we have Great ambitions for growing the business in Vietnam and elsewhere. And as we scale it up, operations and operating margins will improve throughout

Speaker 1

Thank you, David. The next question is, can you explain why related party liabilities increased from 600,000,000 From Q1 to Q2, is the $2,500,000,000 of related party liabilities different from the funding agreement with the Chairman?

Speaker 3

So the related party liabilities are primarily related to borrowings from the group. So that increase is related to ongoing intercompany borrowings from Bing Group. Bing Group obviously provides a substantial amount of support for FinFAST and has done over the course of its development and will continue to do so until FinFAST is able to operate on a standalone basis. So yes, I think it's explicable in the context of that ongoing funding support from the

Speaker 2

Okay. Any more questions?

Speaker 1

I believe those are all the questions that we have on our line right now.

Operator

Back to Carol for any additional closing comments.

Speaker 1

Thank you again for everyone joining our call this morning. If anyone has any further questions that come up, please reach out to our Investor Relations e mail and we will answer them.

Speaker 2

Have a great day.

Operator

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.

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