The Only Luxury Car Installer in Vietnam Faces Permit Renewal Issues: 10,000 Billion VND in Revenue, Over 1,000 Billion VND in Annual Profit, and Strange Fluctuations in 2023

The Chairman of the Ho Chi Minh City People’s Committee, Phan Van Mai, recently cited the case of an extension request for the Mercedes-Benz car assembly plant as an example of how bureaucratic red tape can hinder development.

Mercedes-Benz Vietnam is the only luxury car assembly company in Vietnam, established as a joint venture between Mercedes-Benz Group AG (MBG AG) and the Saigon Transportation Mechanical Corporation (Samco).

The project is set to expire in 2025 after a 30-year partnership. MBG AG has requested a five-year extension, but for over two years, Ho Chi Minh City has been unable to approve it due to legal complications in the current legislation, which mandates that joint ventures must undergo land retrieval and rearrangement upon expiration.

Ho Chi Minh City’s inability to grant the extension stems from a lack of appropriate mechanisms. Meanwhile, car assembly and manufacturing projects in Vietnam, such as THACO’s complex in Chu Lai, Quang Nam, and the Hyundai Thanh Cong joint venture in Ninh Binh, have been making significant contributions to the state budget.

About the Mercedes-Benz Vietnam (MBV) Car Factory

The Mercedes-Benz Vietnam car manufacturing and assembly plant, located on Quang Trung Street in Go Vap District, Ho Chi Chi Minh City, is operated by Mercedes-Benz Vietnam Co., Ltd. (MBV). Established in 1996, the plant commenced operations in 1997 with a monthly capacity of 60 vehicles.

By 2005, the plant had increased its capacity to 12,000 vehicles per year. In 2013, a static electricity dipping workshop with a capacity of 5,285 vehicles per year was added. The following year, an assembly workshop for xi-trucks with a capacity of 720 units per year was included, but it is currently inactive.

The car manufacturing project has a total investment of VND 1,127 billion. The workforce comprises 600 employees. According to the Prime Minister’s Decision No. 844/1995, Decision No. 871/1999, and the land lease contract No. 727/1996 signed with the Ho Chi Minh City People’s Committee, the plant operates on a land area of over 104,000 square meters.

The plant currently assembles four car models: the C-Class, E-Class, GLC, and the recently introduced high-performance Mercedes-AMG C 43 4MATIC, which has been assembled in Vietnam since July 2023.

In the MBV joint venture, with a charter capital of VND 402.5 billion, Mercedes-Benz Group AG holds a 70% stake, while Samco contributes the remaining 30% in the form of land use rights. Samco has completed its capital contribution in the form of land use rights.

Mr. Gerd Bitterlich (born 1963, German) is the current General Director and legal representative of MBV.

From 2014 to 2022, MBV consistently demonstrated steady growth in its business performance, generating nearly VND 10,000 billion in revenue and over VND 1,000 billion in post-tax profits annually.

Potential for Reporting Losses in 2023

However, it is likely that MBV reported a loss in 2023. According to the 2023 audited financial statements, Samco recorded a loss of over VND 28 billion from its joint venture. In previous years, Samco’s profits were mainly derived from joint ventures like Isuzu and MBV.

This possibility is further supported by Samco’s decrease in the value of its investment in MBV, from VND 1,028 billion at the beginning of the year to VND 958 billion at the end of the year (a reduction of nearly VND 70 billion), despite not receiving dividends from MBV.

While MBV has not disclosed its sales figures in Vietnam, in March 2020, on the occasion of the 25th anniversary of the joint venture’s operation in Vietnam, MBV’s leadership revealed that they had achieved a record delivery of 6,800 vehicles to customers in 2019, the highest since the joint venture’s inception.