Mercedes-Benz Moves to Restructure Production in Face of Falling Profits
Having experienced a 30-percent drop in profits in 2024, Mercedes-Benz is taking measures. The automaker announced it will reduce production capacity and relocate some to countries where it’s more profitable to operate. The brand expects its automotive margin to fall to 6.0 percent in 2025, a far cry from the 12.6 percent of 2023.
Cuts in Germany and strategic relocations
Mercedes will reduce production capacity at its German plants from 1 million to 900,000 vehicles by 2027. No plant closures are planned, but job cuts through natural attrition are expected.
Compact cars will be partly produced in Hungary, where costs are 70 percent lower than in Germany. Mercedes will outsource certain functions, in terms of finance, human resources and procurement. The plan also includes increasing local production in target markets (U.S. and China); there the proportion of vehicles produced locally will rise from 60 to 70 percent.
Fewer electrics, more combustion engines
With its low sales volume of electric vehicles, Mercedes is struggling to maintain its margins. Sales of EVs fell by 25 percent in 2024 for the brand, prompting it to review its product strategy.
New model launches
Mercedes intends to launch 19 combustion-powered vehicles (gasoline and diesel) by 2027, as well as 17 electric models, with a focus on high-end models to maximize margins.