Demand and thus the profit collapse, the luxury strategy does not work. Mercedes-Benz is facing restless times. Solid savings should be made at short notice – especially at the expense of the workforce.
The car maker Mercedes-Benz suffered a significant drop in profits last year, especially because of the poorly running business in China. The group result fell by a good 28 percent to 10.4 billion euros in the year, as the DAX company announced.
Mercedes-Benz named less sold cars in China and a weak sales in Europe as reasons for the decline in profit in 2024. Sales also fell by 4.5 percent to 145.6 billion euros in the past financial year. The decline in cars and vans was roughly equally strong. The result is within the framework of the forecast, which had to be reduced twice last year.
Chief floor announces savings
Mercedes boss Ola Källenius spoke of a solid result in a very challenging market environment and announced a “performance program” with savings.
The company is now taking measures to become slimmer, faster and stronger, says Källenius. For example, the direct sales model should be further strengthened and the costs should decrease quickly and clearly. By 2027, Mercedes plans to reduce production costs by ten percent.
No improvement in sight
According to the car maker, the situation will hardly get any better in the current year. Sales and sales should be slightly under the previous year, the operating profit should continue to decrease.
Due to the decline in profits, the dividend for shareholders will also decrease. The Board of Directors and Supervisory Board want to propose 4.30 euros per share in May. Last year it was 5.30 euros.
Reasons for premiums and Special payments
From the company's point of view, the employees must also make a contribution to the savings program: The works council has informed the employees in an extra edition of the employee newspaper- and, given the company's savings ideas, speaks of a “horror list”: Among other things, the success bonus that the employees receive annually is to no longer receive small exceptions and anniversary benefits for many years of service.
With the premium alone with which the company involves employees every year in business success, a lot of money would be saved: the premium will receive the 90,00,000 employees in Germany once a year, with a premium of 5,000 euros, 450 million euros would come together.
According to information from the works council, it is also planned to dismantle jobs – although there is currently an employment guarantee, and operating dismissals are excluded by 2030.
Shift in production to Hungary
In order to save further costs, the car manufacturer wants to shift production capacities to countries with low labor costs in the coming years. The production share in countries with low costs will be doubled from 15 to 30 percent in the coming years, said CFO Harald Wilhelm.
“We do not intend to close a work in Germany,” said Wilhelm; Over the next three years, the production capacity in Germany will be reduced by 100,000 units and increased to 200,000 in the Kecskemet plant in Hungary. There, the costs are 70 percent lower than in Germany. A compact model is shifted there from Germany.
These are the construction sites at Mercedes-Benz
Mercedes is currently facing many challenges: Last year, the group sold four percent fewer vehicles than in 2023. The demand in China has collapsed. Also on the home market in Germany, the models do not sell as hoped, electric cars are also not going so well either. In 2024, her share decreased by 23 percent compared to the previous year.
Mercedes himself says SWRRequest, the current economic situation remains extremely volatile worldwide. Only by sustainable increasing efficiency does the company remain financially strong and capable of acting. In the coming years, several billion euros are to be saved annually across all cost types.
The prospects for 2025 are cloudy not only because of the weak car monitor and impending import duties in the USA, Mercedes also produces only a few new models. The compact electric car CLA should score with a long range, fast charging and new digital functions. By the end of the decade, Mercedes is planning dozens of new models, also with combustion engines – the investments will therefore continue to increase.
Industry expert: Mercedes is not efficient enough
Stefan Reindl from the Institute for Automobile Economy (IFA) in Geislingen shares the assessment that Mercedes has to save. He considers the personnel costs to be too high at the car manufacturer and the productivity is too low. These structures, some of which have grown over decades, urgently need to be questioned so that Mercedes remains competitive.
Reindl also sees the employee representatives challenged. He points out that very high wages are paid in the auto industry.
Works council: Saving can not only be the solution
The works council also believes that the situation at Mercedes is currently tense. However, the IG Metall representatives criticize in the union newspaper: In view of the complex problems, the Mercedes board of directors only had the one unimaginative answer: save.
The employee representatives do not want to accept that. They emphasize that one will not allow the lack of management to be held on the back of the employees: “Costs scrub alone will not improve competitiveness and was and is not a strategy.”
Hold on to combustion models
Not only in China, the electric cars do not run as hoped. Mercedes boss Källenius, who used to rely heavily on electric vehicles and actually only wanted to offer e-cars by 2030, has therefore already rowed back. He also wants to offer combustion engines until clearly in the 2030s, should be demand.
The trend reversal should bring new models: at the end of the year the electrical variant of the compact CLA is launched. It is produced in Rastatt. From 2026, other models will follow, including the new electric S-Class.
Criticism of luxury strategy – sales prices have increased
Since Källenius took office five years ago, Mercedes has mainly rely on luxury. The Stuttgart car manufacturer particularly wants to address wealthy customers. At the beginning, there was a lot to say that this strategy rose: in 2023 the manufacturer made 14.5 billion euros in profit.
This was also due to the fact that Mercedes continuously increased the prices for his vehicles: the average sales price of a Mercedes rose from 51,000 euros in 2019 to 74,600 euros in the third quarter of 2023.
In view of the current developments, however, this strategy is increasingly criticized. Especially in the top segment, which includes the S and G-Class, sales decreased by 14 percent. Disease the electrical flagships (EQS and EQE) – also in China. Auto expert Reindl still believes that the orientation towards the premium segment continues to be correct. But he also emphasizes: “Mercedes urgently has to deliver with the new models.”
Strong local competition in China
From the point of view of the industry expert, the need for action is particularly large in China. The market there is the most important for Mercedes, but the shops there are only slow. The crisis on the Chinese real estate market is currently mainly affected by wealthy Chinese – the traditional Mercedes buyers.
There is also another problem: in China, domestic providers are pushing on the market that offer electric luxury cars at significantly cheaper prices. Apparently they also meet the taste of the customers better.
