At the beginning of July, Germany’s Kärcher Group, renowned for its high-pressure cleaning products, inaugurated a new $20 million production factory at Tam Hiep Port Logistics Industrial Park (IP) in the south-central province of Quang Nam.

Several Kärcher centres and service points have been established throughout the country in the past dozen years. In addition, its IT subsidiary ZOI opened a location in Ho Chi Minh City a few years ago. The company’s production plant in Tam Hiep IP in Quang Nam is also brand new, with end-consumer appliances for the entire Asian region manufactured there.

Tam Hiep Port Logistics Industrial Park, Photo: danhbaquangnam.com

The new plant in the economically strong centre of Vietnam is Kärcher’s second mainstay in the growth region of Asia. Following the commencement of production, the factory will reach an output of 500,000 products in 2024. The figure is projected to rise to 1.7 million products in 2025 and 2.5 million products in 2026.

A few weeks previously, Ziehl-Abegg Vietnam, a German provider of ventilation, control, and drive technology, also opened a new production facility in the southern province of Dong Nai.

Alexander Reich, general director of Ziehl-Abegg Vietnam, told VIR, “We have made a significant investment of €20 million ($21.86 million) in Vietnam, establishing a state-of-the-art production facility spanning 14,000 square metres. This new facility has a capacity to produce 75,000 advanced ventilation systems annually. The strategic location in Vietnam enables Ziehl-Abegg to efficiently serve key markets in Southeast Asia, India, and Australia.”

He further noted that this investment underscores the company’s commitment to expanding its global footprint.

“The Vietnamese market is crucial not only for selling our products but also increasingly for sourcing components locally. Establishing Ziehl-Abegg Vietnam marks an important step in our diversification strategy in Asia,” he said.

The German Business Association (GBA) has observed the sustained interest in Vietnam as a prime investment destination in Asia among German enterprises. Additionally, the entry of German service providers, such as law firm Graf von Westphalen, which recently opened its doors in Ho Chi Minh City, further exemplifies the growing economic ties between Germany and Vietnam.

GBA chairman Alexander Ziehe said Vietnam’s strategic location, nestled between the dynamic ASEAN business hubs to the south and central regions and the robust Chinese supply chain to the north, positions it as an ideal regional hub for sourcing and exports.

“This advantage has been instrumental in deepening the supply chain within Vietnam, drawing in new industries, and fostering increased value creation locally,” Ziehe said. “Supported by an energetic and diverse workforce, Vietnam is on a promising path to recovery. We are optimistic that by the end of 2024 and into 2025, we will witness a resurgence in business activities, propelling the nation’s ambitious growth trajectory.”

Ziehe anticipates a wave of investments, particularly from German companies that have already established a local presence. “These companies are poised to expand their production, enhance local sourcing, and intensify sales efforts in alignment with the region’s economic resurgence. While we expect additional foreign direct investment from smaller enterprises embracing Vietnam in their global strategies, we acknowledge the increasing allure of other regional players like Malaysia and Thailand,” he said.

According to a report by the Ministry of Planning and Investment, as of June 20, German investors rank 17th in the list of 146 countries and territories investing in Vietnam. German investors have funded $2.76 billion across 472 projects in the country.

According to the European Chamber of Commerce in Vietnam’s (EuroCham) Business Confidence Index report for the second quarter of 2024, Vietnam retains its favour as an investment destination for European companies in general, with nearly 70 per cent of business leaders recommending Vietnam.

The report also pointed out that European businesses in Vietnam are adjusting their outlook, with the index settling at 51.3 points in the second quarter of 2024. While this represents a slight decrease, the cautious optimism aligns with Vietnam’s strong first-quarter GDP growth, suggesting a recalibration of expectations amidst a promising economic backdrop.

EuroCham chairman Dominik Meichle said, “Vietnam’s appeal to European businesses is clear. The country’s young, eager workforce and government incentives make it a cost-effective place to manufacture goods. The EU-Vietnam Free Trade Agreement further boosts this advantage by lowering taxes on imported and exported items. Vietnam’s location in Southeast Asia is another plus.”

Vietnam’s attractiveness for European tech companies is also apparent, Meichle added. “The government’s initiatives, including tax incentives and industrial zones, have shown some success, as seen by the increasing interest in more advanced manufacturing. The growing interest in semiconductor production is proof of this. As the world’s demand for electronics grows and supply chains change, Vietnam is in a good position to become a major player,” he said.