RAM Ratings affirms AAA(s) ratings of Mercedes-Benz Services Malaysia's guaranteed debt programmes

RAM Ratings has affirmed the respective AAA(s)/Stable/P1 and AAA(s)/Stable ratings of Mercedes-Benz Services Malaysia Sdn Bhd's (MBSM or the Company) RM3 bil Commercial Papers/Medium-Term Notes (MTN) Programme (2018/2025) and RM3 bil MTN Programme (2018/2038). The programmes are subject to a combined limit of RM3 bil. 

The ratings reflect the strength of irrevocable and unconditional guarantees extended by MBSM's ultimate parent, Mercedes-Benz Group AG (the Group), which enhance the credit profile of the Company's debt facilities beyond its standalone credit strength. 

Mercedes-Benz Group AG's credit profile reflects its strong competitive position as a leading global premium vehicle manufacturer as well as the sturdy financial metrics of its automotive business. While the Group's revenue was relatively flat at EUR153 bil in FY Dec 2023 (FY Dec 2022: EUR150 bil), its pre-tax profit rose 31% to EUR14.9 bil, primarily driven by a strategic focus on high-end car model sales which typically collect wider margins. Excluding the gross debt of its financial services division, the Group was in a robust net cash position. This affords adequate funding for investment outlays and an ample buffer against unexpected industry downturns in the next two years.

Mercedes-Benz Group AG's Malaysian operations are represented by MBSM and Mercedes-Benz Malaysia Sdn Bhd (MBMy, the retailer and distributor of Mercedes-Benz vehicles and spare parts). MBSM is the captive financier for MBMy, having financed 4.1 out of 10 new passenger cars in 2023. MBSM's standalone credit profile is anchored by solid asset quality indicators which moderate rating weaknesses from a highly leveraged balance sheet and an inherent dependence on wholesale funding. 

MBSM's gross impaired financing (GIF) ratio remained healthy at 1.0% as at end-2023 (end-2022: 0.9%). The writebacks of most Covid-related