Mercedes-Benz China has finally carried out the widely rumored layoffs, primarily impacting its sales and automotive finance systems with a layoff ratio of roughly 15%.

By Cao Lin

Edited by Mao Shiyang

Original content by Auto Pixel (ID: autopix)

The long-anticipated layoffs at Mercedes-Benz China have now come to fruition.

We have exclusively learned that Mercedes-Benz China conducted interviews with certain employees today and initiated layoffs on the same day, affecting approximately 15% of its workforce. This round of layoffs primarily targets the sales and automotive finance systems, with the main entities being Mercedes-Benz (China) Automobile Sales Co., Ltd. and Mercedes-Benz Auto Finance Co., Ltd. The R&D system remains unaffected at this time.

In addition to receiving N+9 compensation, laid-off employees will continue to receive their salaries for March and April if they do not join a new company within the next two months. This translates to a maximum compensation package of N+11 from Mercedes-Benz China.

Among the layoffs conducted by foreign automakers in China, Mercedes-Benz's compensation package is considered quite generous. In October last year, Volkswagen China initiated layoffs with a maximum compensation of N+6. Earlier, in April last year, Tesla China offered N+3 compensation for its layoffs.

A source close to Mercedes-Benz China revealed that this is a "general layoff," involving almost every department within the sales and finance companies. A significant portion of the laid-off employees have "open-ended" labor contracts.

According to Mercedes-Benz China's tradition, employees typically sign a three-year contract upon initial hiring, followed by a two-year contract upon the first renewal, and then an open-ended labor contract upon subsequent renewals. This suggests that many of the laid-off employees have been with Mercedes-Benz China for over five years.

Rumors of layoffs have been circulating among Mercedes-Benz China employees since the second half of last year. The day before the layoffs were announced, on February 25, Mercedes-Benz China held a Town Hall meeting chaired by Ola Källenius, Chairman of the Board of Management of Mercedes-Benz Group AG. An employee who attended the meeting informed us that although layoffs were not explicitly mentioned, most employees were mentally prepared for what was to come.

Just a week earlier, on February 20, Mercedes-Benz released its 2024 financial year results, reporting annual revenue of €145.6 billion (approximately RMB 1,112.6 billion), a year-on-year decrease of 4.5%; earnings before interest and taxes (EBIT) of €13.6 billion (approximately RMB 103.5 billion), a year-on-year decrease of 31%; and net profit of €10.4 billion (approximately RMB 79.4 billion), a year-on-year decrease of 28%.

Mercedes-Benz attributed the decline in performance to reduced sales, particularly in the Chinese market. In 2024, Mercedes-Benz sold 714,000 vehicles in China, a year-on-year decline of 6.7%. China is Mercedes-Benz's largest single market, contributing to a 3% year-on-year decline in global sales to 1.983 million vehicles.

The decline in sales has impacted Mercedes-Benz China's financial performance. In 2024, Mercedes-Benz's revenue in China was €23.139 billion (approximately RMB 175.9 billion), a year-on-year decrease of 8.5%.

Mercedes-Benz anticipates that the pressure on performance and finances will persist for several years and will therefore continue to implement measures to reduce fixed costs at least until 2027.

During the financial results conference, Ola Källenius stated, "To ensure the company's competitiveness, we are taking measures to make the company faster, leaner, and stronger." Layoffs are one of these measures, and Mercedes-Benz will also proceed with layoffs in other countries and regions besides China.

Despite the decline in sales performance and profitability, Mercedes-Benz still needs to maintain a high level of R&D expenditure in the hope of reversing the situation after 2027. This is why the current round of layoffs has not affected the R&D system.

In 2024, Mercedes-Benz's R&D expenditure was €9.7 billion, close to an all-time high. The passenger car division accounted for €8.7 billion, primarily invested in future platforms and technologies, particularly the new-generation operating system MB.OS.

MB.OS is an intelligent cockpit system developed by Mercedes-Benz for its next-generation electric vehicles, aiming to catch up with new players in the electric vehicle market in terms of software architecture. However, we understand that the development progress of this system has lagged behind.

According to plans, the MB.OS system will be mass-produced alongside the new-generation Mercedes-Benz CLA. The CLA represents the first chapter of Mercedes-Benz's next-generation electric vehicles, with the concept car making its debut at a German auto show as early as September 2023.

The new-generation Mercedes-Benz CLA is gradually being refined at the hardware level. We understand that this vehicle entered the prototype factory of Mercedes-Benz in Daxing, Beijing, around November 2023.

However, due to the delay in the MB.OS progress, the start of production (SOP) of the new-generation CLA has been postponed from the initially planned May this year to around September this year.

We have exclusively learned that the development of MB.OS was previously handled primarily by the Mercedes-Benz R&D team in Germany, but now many related R&D projects have been gradually transferred to China.

An employee at Mercedes-Benz China informed us that the company's R&D center in China (RDC) is almost the only institution within Mercedes-Benz China that still has a significant recruitment plan for this year.

However, for employees in the sales system, they will continue to worry about further "cost reduction and efficiency enhancement" measures until Mercedes-Benz regains its competitiveness.

According to Mercedes-Benz's statement at the financial results conference, it will "not provide a clear figure for staff reductions" for the time being. Some Mercedes-Benz China employees are concerned that if layoffs occur again in the future, those without "open-ended" contracts may not receive such high compensation.

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