Mercedes-Benz plant at risk as Ho Chi Minh City land lease deadline nears
Mercedes-Benz plant at risk as Ho Chi Minh City land lease deadline nears
A car assembly factory in Go Vap District, Ho Chi Minh City operated by Mercedes-Benz Vietnam Co. Ltd., a joint venture between Germany’s Mercedes-Benz Group AG and Vietnam’s Saigon Transportation Mechanical Corporation (SAMCO), will have to shut down permanently if land lease extension procedures are not finalized by August 31.
A car assembly factory in Go Vap District, Ho Chi Minh City operated by a joint venture between world-renowned carmaker Mercedes-Benz Group AG and a local company will have its land lease contract come to an end in April 2025. Photo: Ai Nhan / Tuoi Tre |
Mercedes-Benz Group AG expressed concern about the impending deadline for its plant in a letter to the prime minister in July.
The company is seeking a five-year extension on the land lease for the 10.5-hectare site at 693 Quang Trung Street in Go Vap District, pushing the contract's expiration to 2030.
In mid-July, Mercedes-Benz Group AG sent a letter to the prime minister, asking for emergency intervention so that the land lease extension could go smoothly in order to avoid the closure of the factory.
The letter was also sent to relevant ministries and authorities in Ho Chi Minh City, as well as municipal departments.
If the land lease contract is not extended prior to August 31, the company will have to complete all unfinished assembling works and prepare for the stoppage of the plant from January to March in 2025, according to the firm.
The enterprise also presented the negative impacts of the shutdown on its workers, partners, distributors, and suppliers.
Mercedes-Benz said in the letter that it pledges to continue doing business in Vietnam, but it will only import autos from ASEAN nations, Europe, and the United States rather than trade locally-assembled cars.
The company mentioned that it had previously sent another letter to relevant units emphasizing a deadline of March 31 when it had to stop supplying car parts and lay off workers.
The world-renowned carmaker hoped that the prime minister would support it and direct relevant ministries and agencies to prioritize the completion of the plant’s land lease extension prior to August 31.
According to a report submitted by SAMCO to the Ho Chi Minh City administration, though the Mercedes-Benz Vietnam project expires in April next year, the firm could not carry out any investment and production plan at the factory due to dubious success in land lease extension.
After March 31 this year, the production of some auto parts in Germany that were set for the Vietnamese market was halted.
If the land lease contract is not extended before August 31, Mercedes-Benz Vietnam will not be able to place orders on the parts from Germany.
The factory is still operating at a low capacity because of the uncertainty of the extension.
“The number of workers at the plant has been constantly reduced. Only 500 employees currently remain at work,” said SAMCO.
The company once employed 800 workers.
In September 2021, Mercedes-Benz Vietnam proposed extending the land use by five years until 2030.
However, the proposal has yet to be passed on account of some legal hindrances over investment, land use, and public asset management aspects.
At a meeting with the Ho Chi Minh City administration on August 17, Party General Secretary and State President To Lam deemed the stagnant extension process as unreasonable.
Mercedes-Benz AG Group holds a 70-percent stake at Mercedes-Benz Vietnam Co. Ltd., while SAMCO owns the remaining 30 percent.
The car assembly plant was licensed in 1995 and Mercedes-Benz Vietnam was allowed to use the land lot at 693 Quang Trung Street for 30 years from April 1995.
Mercedes-Benz Vietnam submitted VND5.5 trillion (US$220 million) a year to the city’s budget from 2017 to 2021, according to the Ho Chi Minh City Department of Planning and Investment.
