German automaker Mercedes-Benz Group and its subsidiaries in China are planning to lay off up to 15% of their employees in China, with the layoffs mainly concentrated in the finance and sales departments, two people familiar with the matter said. The move comes as Mercedes-Benz faces increasing competitive pressure in China, the world's largest car market.
Sources said Mercedes-Benz Auto Finance Co., Ltd. and Beijing Mercedes-Benz Sales and Service Co., Ltd. will bear the impact of the layoffs. The two companies are at a disadvantage competing with Chinese financial institutions, including state-owned banks, who are able to offer car buyers more attractive auto loan packages, people familiar with the matter said.
It is reported that Mercedes-Benz has initiated layoff procedures, including not renewing the contracts of some fixed-term employees, and the pace of layoffs has accelerated significantly this month. However, people familiar with the matter emphasized that there are still variables in Mercedes-Benz's layoff plan. The company has not yet made a final decision on the specific scale of layoffs, and the actual layoff ratio may be less than 15%.
It is unclear whether the layoffs will affect Mercedes-Benz's China headquarters or the production units of its joint ventures with Chinese companies. Mercedes-Benz Group China said in a statement in response to Bloomberg that the company has been working closely with employees to adjust operating strategies based on the competitive environment and market demand.
Mercedes-Benz’s decision reflects the difficulties faced by foreign car companies in the Chinese market. With the strong rise of local brands such as BYD, traditional foreign automobile brands are rapidly losing market share. These local brands have won the favor of many consumers by quickly bringing high-tech electric vehicles to the market. Coupled with the increasing downward pressure on the economy, Chinese consumers have become more cautious in consumption decisions, which further exacerbates the difficulties of foreign car companies.
In fact, Mercedes-Benz is not the only foreign car company seeking to streamline its operations in the Chinese market. Last year, there were reports that Porsche was cutting jobs in China. In addition, a BMW Group spokesperson revealed that BMW China did not renew contracts with some employees last year, which affected 2% to 5% of employees, and plans to take similar measures this year.
It is worth noting that data released by Mercedes-Benz last month showed that its car sales in China last year fell 7% year-on-year. This performance also dragged down its global car deliveries last year. Facing the increasingly severe market environment, foreign car companies are adjusting their strategies in China to cope with the challenges from local competitors.