Mercedes-Benz is preparing another round of job reductions in Germany as the luxury carmaker faces mounting pressure from Chinese competitors, declining sales in its biggest overseas market and weakening profitability.
The company’s chief executive, Ola Källenius, announced on Wednesday, October 28, that Mercedes would restart its voluntary severance programme in Germany from December 2026. The move forms part of efforts to reduce fixed costs and improve the company’s competitiveness.
Speaking during a presentation of the company’s third-quarter results, Källenius said Germany accounts for approximately 15 per cent of Mercedes-Benz sales but is home to about two-thirds of its employees and operational structures. He said the imbalance had increased pressure on the company to reduce costs at its German operations.
Mercedes did not disclose how many employees could be affected by the latest programme. Källenius also confirmed that discussions with trade unions over additional cost-cutting measures were continuing, but said the company could not provide further details while negotiations remained ongoing. The latest announcement specifically concerns voluntary departures in indirect functions in Germany, rather than a confirmed programme of compulsory redundancies across the company.
The decision comes as Mercedes struggles with intensifying competition in China, the world’s largest automobile market. Chinese manufacturers have expanded their presence with competitively priced electric and conventional vehicles, while established international brands face pressure from changing consumer preferences and a prolonged price war.
Mercedes’ difficulties in China have also affected its financial outlook. The company recently lowered its 2026 forecast for the adjusted return on sales in its passenger-car division to between two and three per cent, down from its previous projection of three to five per cent. It cited the increasingly challenging market environment in China as a major factor behind the revision.
In its third-quarter results, Mercedes-Benz reported revenue of €30.7 billion, compared with €32.1 billion in the corresponding period of 2025. Net profit, however, increased to €1.52 billion from €1.19 billion a year earlier, while adjusted group earnings before interest and taxes fell by 15 per cent to €1.78 billion. The figures show that the company’s performance is under pressure despite stronger reported net profit.
Källenius has maintained that Mercedes cannot afford to withdraw from China despite the difficulties, describing the market as strategically important to any global car manufacturer. The company is reviewing its approach to the country, including greater local product development and efforts to reduce costs while responding to the preferences of Chinese consumers.
The pressure is not limited to Mercedes. Other German carmakers are also restructuring their operations as they contend with high production costs, weaker demand and competition from Chinese manufacturers. Volkswagen has been pursuing major workforce reductions, while Swedish manufacturer Volvo Cars recently announced plans to eliminate approximately 2,500 positions worldwide amid a difficult business environment. These developments underline the wider challenges confronting established European automakers.
For Mercedes, the latest severance programme is part of a broader effort to reshape its cost structure and protect profitability. The company said it had already reduced fixed costs by approximately 25 per cent since 2019 and was intensifying productivity measures, particularly at its German locations.
The renewed job-cutting drive highlights the growing consequences of the changing global automobile market for Germany’s manufacturing sector. Whether further reductions will follow depends partly on the outcome of negotiations with employee representatives, the company’s financial performance and its ability to compete more effectively in China and other major markets.