Mercedes-Benz's "sky-high" layoffs, Chinese market lost

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Author | Chai Xuchen

Editor | Wang Xiaojuan

Mercedes-Benz's lavish layoff plan has once again shocked the automotive world.

Half a year 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 around 30,000 employees to voluntarily leave.

Recently, reports indicate that around 4,000 employees have accepted the severance offer and left. Senior managers can receive up to more than 500,000 euros (about 4.13 million yuan) in compensation, while an ordinary factory worker can get a severance equivalent to two years’ salary. Some netizens jokingly say this is Mercedes giving employees a "life reboot experience card"—with this money, they can retire early.

As Mercedes-Benz's largest single market globally, whether China will be included in this round of adjustments is still unclear.

In fact, what this astonishing severance compensation reflects is not the company's generosity, but a life-and-death transformation battle, something evident in Mercedes-Benz's financial reports.

In the third quarter of this year, Mercedes-Benz Group's global sales were 525,300 vehicles, down 12%% year-on-year; cumulative sales for the first three quarters were 1.602 million vehicles, down 9% year-on-year. In China, its largest base, the downturn continued: third-quarter sales in China were only 125,000 vehicles, a year-on-year decline of 27%, exceeding the 19% decline in Q2.

According to Wallstreetcn, prices for many Mercedes-Benz models are now heavily discounted. Autohome data show that key volume models including the A-Class, C-Class, EQA, EQB, etc., are priced by dealers at nearly half the suggested retail price. Clearly, the former German giant can no longer hold its head high in China’s price war.

Thus, Mercedes-Benz's performance this year was somewhat foreshadowed. In the first half, the company announced large-scale layoffs and cost reduction plans, aiming to cut production and fixed costs each by about 10% by 2027, reduce output by 100,000 vehicles at German factories, and implement indirect job cuts.

It’s not just Mercedes-Benz—other German brands are also struggling. BMW Group’s first-half revenue fell 8% year-on-year; net profit after tax dropped 29% year-on-year; Volkswagen Group’s net profit after tax for the first half fell by more than 38% year-on-year.

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

Mercedes-Benz has not been idle in its attempt to transform. Recently it launched the new CLA model, with the all-electric GLC SUV coming next year, highlighting its electrification ambitions. Its China R&D team exceeds 2,000 people and has invested 10.5 billion yuan over five years, emphasizing a strategy of "in China, for the world."

However, the problem is that the cumbersome structure of traditional car companies is ill-suited to the pace of the new track.

On one hand, supply chain systems, production processes, and talent structures built up in the internal combustion engine era are now a heavy burden in the age of electrification. In Mercedes-Benz’s German factories, workers' skills are mainly in mechanical manufacturing, while talent needed for batteries and software is seriously lacking.

On the other hand, redundant management and slow decision-making have become highly visible drawbacks in the competition around smart cars. While Huawei’s intelligent driving assistance system already enables urban road autopilot, Mercedes-Benz’s Level 3 driving assistance remains limited to specific highway scenarios.

This generational gap is forcing Mercedes-Benz to cut staff and save 5 billion euros in costs by 2027 to fund R&D.

CEO Ola Källenius’ remarks are meaningful: "Generous severance pay is intended to support employees' transition periods. The company hopes to encourage those willing to retire early or seek new opportunities to leave voluntarily, thereby freeing up space for the company's future development."

Clearly, this "severance pay" is actually a strategic investment—diverting resources from traditional departments to electrification and intelligence. Mercedes-Benz plans to outsource functions such as finance and HR, and stop replacing retiring employees, thereby freeing up 10% of annual production costs.

In recent years, Germany’s manufacturing advantage has faded. Giants like VW and Audi have also reduced output and cut staff. In the wave of digital transformation, Germany’s auto industry has been slow to change and overtaken by rivals in new energy.

A Boston Consulting report points out that traditional carmakers’ labor structures are experiencing "double pressure": on one hand, demand for internal combustion engine-related roles is dropping 5%-8% annually; on the other, gaps in roles such as software engineers and battery experts continue to expand, intensifying the talent war.

Behind these labor structure adjustments is a restructuring of the automotive industry’s value chain.

Morgan Stanley points out that in the era of smart EVs, software development costs have surged from 10% in traditional cars to 40%, while the value of mechanical manufacturing processes has fallen accordingly. This shift forces carmakers to reshape their talent matrices—Mercedes-Benz’s recent founding of an AI lab in Silicon Valley and assembling a 100-person in-vehicle system team in Berlin are notes in this strategic shift.

At present, Mercedes-Benz’s billions of euros in severance pay are both a farewell to the past and a bet on the future. If the goal of saving 5 billion euros by 2027 can be achieved, it may win a window for transformation. The bigger question lies in whether, as German giants like VW and BMW roll out similar plans, this signals an industry-wide strategic contraction in European automotive.

At the other end of Eur-Asia, Chinese carmakers are rapidly integrating the industry through "vertical and horizontal alliances." This future-defining race in the automotive sector may have only just begun.

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