RAM Ratings has affirmed the AAA(s)/Stable rating of Mercedes-Benz Services Malaysia Sdn Bhd’s (MBSM or the Company) RM3 bil MTN Programme (2018/2038), reflecting the irrevocable and unconditional guarantees extended by its parent, Mercedes-Benz Group AG (the Group).
The rating continues to hinge on the guarantor’s credit strength, underpinned by its leading position in the global premium automotive segment, robust brand equity and still-solid financial metrics. However, the Group’s operating performance has weakened amid softer vehicle demand, reduced competitiveness in key markets – mainly China – and persistent pricing pressures. In FY Dec 2025, revenue dipped 9% to EUR132 bil while pre-tax profit fell to EUR6 bil (FY Dec 2023: EUR14 bil). Although we expect earnings to remain under pressure for fiscal 2026, the Group’s sizeable net cash of EUR10.0 bil (excluding financial services) and steady cash flow generation should provide a meaningful buffer against near-term headwinds.
The agency noted that in Malaysia, MBSM serves as the captive financier for Mercedes-Benz Malaysia vehicles, financing 46% of new Mercedes-Benz vehicles sold in 2025. Its standalone credit profile is underpinned by sound asset quality, which partly moderates its structurally high leverage, reliance on wholesale funding, and modest profitability. The Company’s strategic importance to the Group’s domestic franchise and its role in supporting vehicle sales also reinforces its credit profile.
MBSM’s gross impaired financing (GIF) ratio improved slightly to 0.7% as at end-2025, indicating that overall asset quality remains sound. Its credit cost ratio rose to 43 bps while GIF coverage moderated to 78%, mainly due to write-offs related to specific portfolio events during the year. All said, RAM expects asset quality to remain broadly stable, backed by a predominantly higher-income borrower base, although selected SME borrowers may face tighter repayment capacity in the challenging operating environment.
Financing receivables declined 7% last year, tracking the 24% contraction MBMy’s vehicle sales as competition intensified, particularly from Chinese EV marques, while consumer preferences shifted toward more technologically advanced models. The contraction underscores MBSM’s close correlation to the performance of the underlying vehicle franchise. The ratings agency expects financing growth to recover modestly this year, supported by price adjustments, product refreshers and more competitive financing packages, although the pace of recovery will depend on MBMy’s ability to defend its market share in an increasingly competitive domestic auto market.
Higher impairment charges and margin compression pushed MBSM’s pre-tax profit down to RM21.8 mil in FY Dec 2025 (FY Dec 2024: RM23.9 mil), highlighting the Company’s still limited earnings buffer. Although gearing stayed elevated at 10.4 times, its borrowings are fully guaranteed by the Group, supporting continued market access and funding flexibility despite the Company’s dependence on wholesale funding.
