– Mercedes-Benz is laying off 30,000 employees globally as part of a major cost-cutting initiative, with subsidies ranging up to 4 million yuan for eligible staff. – The company’s financial performance has deteriorated, with H1 2024 net profits plunging 55.8% year-over-year, driven by aggressive price cuts in key markets like China. – A voluntary departure plan, offering ‘N+11’ compensation, aims to reduce labor costs by 50 billion euros annually while minimizing union disputes. – Strategic investments in Chinese EV and smart tech firms, such as Qianli Technology (千里科技) and BAIC BluePark (北汽蓝谷), highlight Mercedes-Benz’s pivot away from traditional combustion engines. – The layoffs and restructuring reflect broader industry pressures as Chinese electric vehicle makers accelerate global expansion, challenging established automakers. The automotive world was jolted recently when Mercedes-Benz (奔驰), a titan of the industry, unveiled plans to slash 30,000 jobs worldwide. This dramatic move comes alongside a generous voluntary departure plan, with subsidies reaching up to 4 million yuan for long-serving executives, signaling a profound strategic shift. As the company grapples with plummeting profits and intensifying competition, particularly from Chinese electric vehicle manufacturers, this restructuring underscores the urgent need for legacy automakers to adapt. The voluntary departure plan is at the heart of Mercedes-Benz’s efforts to streamline operations without triggering widespread labor unrest. For global investors and industry watchers, this development highlights the accelerating transformation of the automotive sector, where electric and smart technologies are reshaping market dynamics. With Mercedes-Benz’s financial health under scrutiny, its ability to execute this transition will be critical in maintaining its competitive edge.
Financial Turmoil at Mercedes-Benz
Mercedes-Benz (奔驰) is facing significant headwinds, as evidenced by its latest financial reports. In the first half of 2024, the company’s operating revenue fell to 663 billion euros, an 8.6% decrease compared to the previous year. More alarming is the net profit, which dropped by 55.8% to just 27 billion euros, indicating severe pressure on margins. This profit crunch is largely attributed to aggressive discounting strategies, especially in China, where Mercedes-Benz has been forced to offer substantial incentives to maintain market share.
Revenue and Profit Decline Analysis
The sharp decline in profitability stems from a dual challenge: shrinking margins on traditional internal combustion engine vehicles and ongoing losses in the electric vehicle segment. For instance, best-selling models like the Mercedes E-Class and C-Class in China now commonly feature discounts exceeding 100,000 yuan. Electric models, however, are struggling to gain traction, often selling at a loss despite heavy promotions. This has created a vicious cycle where燃油车 (fuel vehicle) profits are eroded to subsidize unprofitable electric cars, exacerbating the company’s financial strain.
Impact of Price Cuts in China
China, the world’s largest automotive market, has become a battleground for Mercedes-Benz. Intense competition from domestic EV producers like NIO (蔚来) and BYD (比亚迪) has compelled the German automaker to implement deep price cuts. These discounts, while preserving sales volume, have severely impacted per-unit profitability. Data from the China Association of Automobile Manufacturers (中国汽车工业协会) shows that premium vehicle discounts have widened by over 15% in the past year, squeezing margins across the board. For Mercedes-Benz, this environment necessitates drastic measures to reduce costs and reallocate resources toward more sustainable business lines.
The Voluntary Departure Plan Explained
Central to Mercedes-Benz’s restructuring is the voluntary departure plan, designed to incentivize employees to leave without compulsory terminations. This approach not only mitigates potential conflicts with labor unions but also upholds the company’s reputation as a preferred employer. The plan offers compensation based on a formula of ‘N+11,’ where N represents years of service, and 11 denotes additional months of pay. For example, an employee with three years of tenure would receive 14 months’ salary as a severance package.
Subsidy Structure and Examples
The subsidies vary widely, targeting different employee tiers. A typical factory worker might receive around 800,000 yuan, while a mid-level manager with 30 years of service could qualify for the maximum 4 million yuan payout. Additionally, the plan includes an incremental benefit: for each additional year of employment before departure, the subsidy increases by 15%. This structure encourages longer-serving staff to delay their exit, balancing immediate cost savings with phased workforce reduction. Since its introduction, approximately 4,000 employees have opted into the program within six months, progressing toward the three-year goal of 30,000 layoffs.
Employee Response and Goals
The voluntary departure plan has been met with mixed reactions. While some employees appreciate the financial cushion, others express concerns about job security in a shrinking industry segment. Mercedes-Benz aims to achieve annual savings of 50 billion euros through this initiative, which will be redirected toward research and development in electric and autonomous driving technologies. By avoiding forced layoffs, the company seeks to maintain morale and avoid the negative publicity that often accompanies large-scale downsizing.
Strategic Pivot to Electric and Smart Vehicles
Recognizing the imperative to evolve, Mercedes-Benz is aggressively realigning its strategy toward electrification and智能化 (intelligentization). This shift involves significant investments in Chinese technology firms and a reorientation of its research and development footprint. For instance, the company acquired a 3% stake in Qianli Technology (千里科技) for 1.339 billion yuan, a move that leverages its relationship with吉利 (Geely), whose founder Li Shufu (李书福) is the largest single shareholder in Mercedes-Benz’s parent company, Daimler AG (戴姆勒集团).
Investments in Chinese Technology
Mercedes-Benz’s collaboration with Chinese partners extends to its investment in BAIC BluePark (北汽蓝谷), making it the fifth-largest shareholder in this state-owned electric vehicle maker. These partnerships provide access to cutting-edge battery and autonomous driving technologies, areas where Chinese firms have gained a competitive edge. The voluntary departure plan frees up capital and human resources to accelerate these collaborations, enabling Mercedes-Benz to integrate advanced features into its future vehicle lineup more efficiently.
R&D Shift to China
Historically, Mercedes-Benz conducted most of its research and development in Europe, with products adapted for global markets. Now, the company has established dual R&D hubs in Beijing and Shanghai, signaling a reversal of this approach. By basing its intelligent driving teams in China, Mercedes-Benz can tap into the region’s vibrant tech ecosystem and rapidly evolving consumer preferences. This strategy allows for the development of vehicles tailored to Chinese tastes, which can then be exported to other markets, reflecting a broader trend of innovation shifting eastward.
Broader Industry Implications
Mercedes-Benz’s layoffs and strategic overhaul are indicative of wider trends affecting the global automotive industry. As electric vehicle adoption accelerates, traditional manufacturers must contend with disruptive newcomers, particularly from China. Companies like XPeng (小鹏) and Li Auto (理想汽车) are not only dominating domestic sales but also expanding into Europe and North America, challenging incumbents on their home turf. This competitive pressure is forcing legacy automakers to streamline operations and innovate rapidly to avoid obsolescence.
Competition with Chinese EV Makers
Chinese electric vehicle manufacturers have leveraged government support, supply chain advantages, and agile innovation to capture market share. For Mercedes-Benz, this means playing catch-up in areas like battery efficiency and software integration. The voluntary departure plan is a crucial step in reallocating talent toward these high-priority domains. However, with Chinese EV brands planning mass overseas expansions, the window for Mercedes-Benz to close the technology gap is narrowing. Industry analysts suggest that the company’s success will depend on its ability to forge strategic alliances and accelerate time-to-market for new models.
Future Outlook for Mercedes-Benz
Despite the challenges, Mercedes-Benz retains strengths, including a strong global brand and a robust燃油车 (fuel vehicle) business that provides cash flow for transformation. The voluntary departure plan, while costly in the short term, is expected to yield long-term benefits by reducing operational expenses and fostering a more agile organizational structure. Investors should monitor key metrics such as EV sales growth, R&D expenditure in smart technologies, and market share in critical regions like China and Europe. As the company navigates this transition, its ability to balance cost management with innovation will determine its position in the evolving automotive landscape. Mercedes-Benz’s restructuring, centered on the voluntary departure plan, marks a pivotal moment in its history. By addressing financial pressures through strategic layoffs and reinvesting in electric and smart technologies, the company aims to secure its future in an increasingly competitive market. For stakeholders, the key takeaways include the importance of adaptability in the face of industry disruption and the need for continuous innovation. As Chinese EV makers expand globally, Mercedes-Benz must accelerate its transformation to maintain relevance. Investors and industry professionals should closely watch the company’s execution of this plan, as it will serve as a bellwether for traditional automakers worldwide. Stay informed on further developments by following regulatory filings and market analyses to make timely decisions in this dynamic sector.