Mercedes-Benz "sky-high" layoffs, losing ground in the Chinese market

Author | Chai Xuchen

Editor | Wang Xiaojun

Mercedes-Benz's extravagant layoff plan has once again shocked the automotive industry.

Six months ago, Mercedes-Benz launched a layoff storm codenamed the "Voluntary Severance Plan." CEO Ola Källenius stated that by offering generous severance packages, the company hopes to encourage about 30,000 employees to voluntarily leave.

Recently, it has been reported that approximately 4,000 employees have accepted the severance plan, with senior management potentially receiving over €500,000 (approximately RMB 4.13 million) in compensation; a regular factory worker can also receive compensation equivalent to two years' salary. Some netizens jokingly remarked that this is Mercedes-Benz giving employees a "life restart experience card," allowing them to retire early with this money.

As the largest single market for Mercedes-Benz globally, it remains unclear whether the China region will be included in this adjustment.

In fact, the astonishing severance compensation reflects not the company's generosity, but a life-and-death transformation game, as can be seen from Mercedes-Benz's financial reports.

In the third quarter of this year, Mercedes-Benz Group's global sales reached 525,300 units, a year-on-year decline of 12%; the cumulative sales for the first three quarters were 1.602 million units, a year-on-year decrease of 9%. Among them, the largest market, China, continued to "lose ground," with sales in the third quarter only reaching 125,000 units, a staggering year-on-year decline of 27%, exceeding the 19% drop in the second quarter.

Wall Street Journal found that many Mercedes-Benz models are currently being offered at significant discounts. According to data from Autohome, the prices of popular models such as the A-Class, C-Class, EQA, and EQB are nearly half of the suggested retail price. Clearly, the once-mighty German automaker has had to "bow down" in the domestic price war.

Therefore, the results for this year have already been foreshadowed for Mercedes-Benz. In the first half of the year, Mercedes-Benz announced a large-scale layoff and cost-cutting plan, aiming to reduce production and fixed costs by about 10% by 2027, cut production by 100,000 units at its German factories, and implement layoffs in indirect positions.

It's not just Mercedes-Benz; other German brands are also facing tough times. BMW Group's revenue in the first half of the year fell by 8% compared to the same period last year; net profit after tax dropped by 29% year-on-year; Volkswagen Group's net profit after tax in the first half of the year plummeted by over 38% year-on-year.

For Mercedes-Benz and other German brands, a major transformation is urgently needed.

Mercedes-Benz has not been without attempts at transformation. Recently, it launched the all-new CLA model and plans to introduce the all-electric GLC SUV next year, showcasing its ambition for electrification; with over 2,000 people in its R&D team in China and an investment of 10.5 billion yuan over the past five years, it further highlights the strategy of "in China, for the world."

However, the problem lies in the fact that the large body of traditional automakers struggles to adapt to the pace of the new track.

On one hand, the supply chain system, production processes, and talent structure accumulated during the internal combustion engine era have become heavy burdens in the era of electrification. Workers at Mercedes-Benz's German factories are primarily skilled in mechanical manufacturing, while there is a severe shortage of talent in batteries and software required for electrification On the other hand, the drawbacks of hierarchical redundancy and slow decision-making have been fully exposed in the competition of smart cars. While Huawei's intelligent driving assistance system has achieved autonomous driving on urban roads, Mercedes-Benz's L3-level assisted driving is still limited to specific highway scenarios.

This generational gap forces Mercedes-Benz to reduce its workforce and save €5 billion in costs by 2027 to fund research and development.

The statement from Mercedes-Benz CEO Ola Källenius is significant: "Generous severance pay is intended to support employees during their transition period. The company hopes to encourage those willing to retire early or seek new career opportunities to voluntarily leave, thereby creating space for the company's future development."

It is clear that this "severance pay" is actually a strategic investment, shifting resources from traditional departments to electrification and intelligence. Mercedes-Benz plans to outsource functions such as finance and human resources and stop replacing retired employees, aiming to release 10% of production costs annually.

In recent years, Germany's manufacturing advantages have diminished, with giants like Volkswagen and Audi cutting production and laying off workers. Amid the wave of digital transformation, the German automotive industry is transitioning slowly and has been overtaken by competitors in the new energy sector.

A report by Boston Consulting points out that the labor structure of traditional car manufacturers is undergoing "dual pressure": on one hand, the demand for internal combustion engine-related positions is decreasing at a rate of 5%-8% per year; on the other hand, the demand for software engineers, battery experts, and other positions continues to expand, intensifying the talent competition.

Behind this adjustment in labor structure is the reconstruction of the automotive industry's value chain.

Morgan Stanley notes that in the era of smart electric vehicles, the proportion of software development costs has surged from 10% in traditional cars to 40%, while the value proportion of mechanical manufacturing has correspondingly declined. This shift forces car manufacturers to reshape their talent matrix—Mercedes-Benz's recent establishment of an AI lab in Silicon Valley and the formation of a hundred-person in-vehicle systems team in Berlin are evidence of this strategic shift.

Currently, Mercedes-Benz's billions of euros in severance pay represent both a farewell to the past and a bet on the future. If the goal of saving €5 billion by 2027 can be achieved, it may win a transformation window. The bigger question is whether the similar plans being launched by German giants like Volkswagen and BMW indicate that the entire European automotive industry has entered a period of strategic contraction.

On the other side of the Eurasian continent, Chinese car manufacturers are accelerating industry integration through "alliances," and this competition concerning the future of the automotive industry may just be beginning