Mercedes to Cut Jobs in China Due to Rising Local Competition

Mercedes-Benz Group AG and its subsidiaries aim to reduce the workforce by up to 15% in China, primarily across finance and sales teams. According to industry reports, this update came into focus when Mercedes was facing intense competition from local players in the world's largest car market.

Mercedes-Benz Automobile Finance and Beijing Mercedes-Benz Sales Service Co. both aim to initiate the process of job cuts, as reported by concerned people. The key units are struggling to rival Chinese institutions, including state-owned banks, offering buyers more attractive vehicle financial options.

The German automaker has already started making job cuts and not renewing contracts of some fixed-term staff. The layoff process can begin in the coming month. However, Mercedes-Benz could change its plans of laying off up to 15% of the workforce in China and adopt a new strategy to strengthen its position in the Chinese car market.

It's also unclear if the decision will impact Mercedes Benz's local head office or the product unit that runs joint ventures with Chinese firms. In a statement given to Bloomberg News, Mercedes-Benz Group China reported that it worked with the local workforce to adjust the operations based on the competitive environment and market demands.

Mercedes' decision to make around 15% job cuts showcases the challenges foreign automakers face in China. Many prominent foreign brands have swiftly lost their share in the Chinese car market amid the growing landscape of local car manufacturers, especially BYC Co, offering capable vehicles under better price points. The economic downturn has also impacted these brands as Chinese car buyers are now more cautious about spending money on their next vehicle purchase.

This German automaker is not the only one planning a job cut in China. Last year, Porsche AG's China unit reduced its workforce. Additionally, BMW AG paused the renewal of contracts with some employees last year, impacting 2-5% of its workforce in China. On the other hand, Mercedes reported a 7% drop in sales in China last year, causing fewer global deliveries of its vehicles.