Mercedes-Benz discusses layoffs of up to 15% in China

The Nikkei learned on February 27 that the German Mercedes-Benz Group, a major luxury car company, is discussing layoffs in local Chinese legal entities. Chinese media and other reports say that the number of layoffs is expected to reach up to 15% of the total number in China. Due to high production costs, the company has announced that it will reduce production and layoffs at its domestic factories in Germany, and will also take measures in China, which has experienced a decline in sales.

Mercedes’ local Chinese legal entity said on the same day that it will strictly abide by relevant laws and regulations, uphold a frank consultation, friendly and responsible attitude, and provide relevant employees with follow-up plans that are as reasonable, legal and legal as possible. At the same time, it said that it will adjust job settings according to business needs, learn new skills with employees, and integrate or reduce redundant and repetitive positions. It implies that layoffs will be carried out.

Mercedes is in trouble in the Chinese market. In 2024, sales in this market will decrease by 7% year-on-year to 680,000 vehicles, and operating income will also decrease by 9% to 23.139 billion euros.

Mercedes has established joint ventures with Zhejiang Geely Holding Group, a private Chinese automaker, and Beijing Automotive Group, a state-owned automaker, for automobile production. However, the layoffs seem to be not in the production department, but in the sales and finance departments.

On February 20, Mercedes announced a restructuring policy to reduce its annual production capacity in Germany from 1 million vehicles to 900,000 vehicles. The cuts will be transferred to its own Hungarian factory, where production costs are relatively low. In addition to layoffs in Germany, it plans to reduce production costs by 10% by 2027 and 20% by 2030.

At a press conference on the same day, Ola Kaellenius, chairman of the company’s board of directors, said: “China must become Mercedes’ second home. There is no panacea, and we have to deal with very fierce competition.”