He promised to streamline the company’s operations and demanded that all of Germany – the largest EU economy – do the same to save its struggling industrial sector.
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“We firmly believe that Germany needs a productivity boost campaign, given the international competition, especially from China,” O. Kaellenius told journalists during a teleconference. “We need to increase the competitiveness of Europe, especially Germany. We have to become better than we have been so far.”
German car manufacturers are trying to reduce overall costs as Chinese competitors take an increasing market share in Europe, reducing the profits of local manufacturers.
Volkswagen is considering laying off up to 100,000 employees across ten of its group companies, while BMW announced last month that it would take cost-cutting measures as poor results in China forced it to lower its profit forecast.
Earlier this month, thousands of Mercedes employees protested proposals to work more hours for the same pay, and last year the car manufacturer set itself a target to reduce overall costs by 10% by 2027.
O. Kaellenius said sacrifices would have to be made and noted that, according to him, the average cost difference between Mercedes divisions in Germany and Hungary is 70%.
“It would be unrealistic to turn Germany into Eastern Europe, let alone China,” he said. “But we have to increase our competitiveness compared to the current situation.”
Losses in China
Mercedes-Benz earlier on Tuesday reported a decline in car business profits as fierce competition in China forced it to write off more than 700 million euros.
Although the overall quarterly net profit, boosted by the van and financial services business, rose 13.5% to 1.09 billion euros, net profit in the main car division fell 26% to 909 million euros, Mercedes said, with its operations negatively affected by competition in China.
This figure does not include a non-cash write-down of 704 million euros that Mercedes included in its investment value in China, indicating that the company anticipates long-term difficulties in the world’s largest car market.
Including this write-down, Mercedes-Benz’s car business profit fell by almost 94%.
“The Chinese market and customers in China remain very strategically important to Mercedes-Benz,” the company said in a statement. “Intense competition, reduced demand, and a model refresh across the entire range continued to impact sales.”
Meanwhile, the number of Mercedes-Benz car deliveries in China – which last year had already reached the lowest level since 2016 – fell another 30% over the quarter, the company said.
Given the poor situation in China, Mercedes-Benz now forecasts that annual sales will decline by up to 7.5% compared to 2025 levels (132.2 billion euros). Previously, the company forecast nearly zero growth.
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