Is Mercedes-Benz preparing for tough times? Reports indicate that Mercedes-Benz plans to lay off 15% of its employees in China, offering compensation of N+9.
On February 26, multiple sources in China reported that Mercedes-Benz China has initiated large-scale layoffs, providing generous compensation of N+9 to affected employees. As of the time of publication, no official response has been issued regarding these reports.
According to official financial disclosures, Mercedes-Benz faced a challenging year, with EBITDA dropping by more than 3%. Sales declined in both China and Germany, making business conditions increasingly difficult.
In response to financial pressures, foreign media reports suggest that Mercedes-Benz may lay off 20,000 employees globally this year.
The German metal industry trade union newspaper IG Metall also reported that Mercedes-Benz Group has announced a series of internal austerity measures. These include freezing salary increases for E4-level and higher management, cutting bonuses for 90,000 employees, and other cost-saving initiatives.
Sources indicate that employee morale at Mercedes-Benz has reached its lowest point in recent years.
Profit Plummeted Over 30%, China and Europe Sales Decline
The passenger car business saw adjusted EBITDA drop by 40%, while sales in China hit a five-year low.
(Mercedes-Benz 2024 financial information overview)
Just six days ago, Mercedes-Benz released its financial results for 2024, revealing that revenue for the year was €145.6 billion, down 4.5% year-on-year. Earnings before interest and taxes (EBIT) stood at €13.6 billion, a 31% decrease, while net profit dropped 28% to €10.4 billion.
(Mercedes-Benz passenger car segment 2024 financial information)
Segment Breakdown:
Passenger Cars: Adjusted EBIT fell to €8.7 billion (approx. RMB 64.55 billion), a 40.5% drop year-on-year. The adjusted return on sales (RoS) declined from 12.6% in 2023 to 8.1% in 2024.
Light Commercial Vehicles: Adjusted EBITDA totaled €2.8 billion (approx. RMB 21.3 billion), down 8% year-on-year. The sales margin also dropped from 15.1% in 2023 to 14.6% in 2024.
Despite declining profits, Mercedes-Benz maintained strong cash flow, with free cash flow from industrial operations reaching €9.2 billion, while net current assets remained stable at €31.4 billion.
Mercedes-Benz attributed its underwhelming performance to declining sales (especially in China), lower net prices, and an unfavorable model mix.
Global Sales Performance
In 2024, total Mercedes-Benz vehicle sales dropped 3% year-on-year to 1,983,400 units. Sales of pure electric models fell by 23% to 185,000 units.
(Mercedes-Benz 2024 sales of premium models)
Regional Breakdown:
North America: Sales rose 8% year-on-year to 365,400 vehicles.
(Mercedes-Benz Cars 2024 global sales performance by market)
Europe: Sales declined 3% to 641,800 vehicles, with German sales falling 9% to 213,500 units.
Asia: Total sales fell 7% to 892,000 units. In China, Mercedes-Benz's largest single market, sales dropped 7% to 683,600 units, returning to 2019 levels.
Facing fierce competition, Mercedes-Benz remains cautious about its 2025 forecast and has even outlined a worst-case scenario.
For 2025, Mercedes-Benz projects that global sales and revenue will decline slightly compared to 2024, while EBITDA and free cash flow will drop significantly.
Passenger car sales margin: Expected to fall from 8.1% in 2024 to 6–8% in 2025.
Light commercial vehicle sales margin: Expected to decline from 14.6% to 10–12%.
Mobility division profitability: Expected to be 8–9%.
(Mercedes-Benz 2025 performance estimates)
"Austerity Program" and 20,000 Layoffs by Year-End
To counter financial difficulties, Mercedes-Benz has implemented a series of cost-cutting measures.
According to IG Metall, union committee member Michael Häberle mentioned a “horror list” of cost-saving initiatives being enforced at Mercedes-Benz.
Although German trade unions remain open to discussions, they have criticized Mercedes-Benz’s management for lacking creativity in its cost-cutting approach.
The key austerity measures include:
Freezing salary increases for E4-level (team leader) managers and above in 2025.
Reducing bonuses for 90,000 employees. (Last year, employees received a €7,300 bonus, approx. RMB 55,700.)
Reducing or eliminating T-Zug benefits, which allow employees to choose between bonuses or vacation.
Decreasing the number of vacation days.
Outsourcing some operations, though no layoffs will occur for operational reasons.
Reducing costs at the Tuscaloosa, Alabama plant by 25%.
Adjusting production plans in China, with some models potentially no longer being manufactured there.
China's Role in Mercedes-Benz’s Strategy
Despite global restructuring, China remains a strategic priority for Mercedes-Benz.
The company plans to launch several China-exclusive models in the next three years, including a pure electric MPV and a long-wheelbase CLA. Additionally, Mercedes-Benz will accelerate the development of a high-level, map-free L2 autonomous driving system, led by its Chinese R&D team.
To improve cost efficiency, Mercedes-Benz aims to cut material costs by 10% through local production, enhancing Beijing Benz’s operational efficiency.
Targeting €5 Billion in Cost Reductions by 2027
A foreign media report revealed that Mercedes-Benz aims to cut €5 billion in costs by 2027, with 50% of these reductions completed by the end of 2025.
To achieve this goal, Mercedes-Benz plans to lay off 20,000 employees, primarily from non-production roles, using voluntary separation agreements.
Conclusion: The Auto Industry Faces a Period of Transition
Mass layoffs at global automakers reflect the growing pains of industry transformation.
From global downsizing to restructuring in China, Mercedes-Benz is implementing aggressive cost-cutting measures in an attempt to maintain its competitive edge.
However, whether these efforts will effectively improve performance depends on the success of its new model lineup and whether consumers ultimately choose to buy Mercedes-Benz vehicles.
Yasir Al-Mansouri have more than 10 years of experience in the automotive journalism world. He is an expert of automotive news articles, features, and reviews on cars, from the latest models to industry trends. He've built strong relationships with car manufacturers and industry experts. Connect with Yasir Al-Mansouri on LinkedIn to stay updated on all things automotive and join our exciting journey in exploring the world of automobiles.
