Mercedes anticipates a 10% decrease in profits by 2025, introducing a cost-cutting plan to continue until 2027

【PCauto】A recent announcement from automotive giant Mercedes-Benz has garnered widespread attention. According to the 2024 financial report released by the Mercedes-Benz Group on February 20, the company expects its 2025 revenue to be slightly lower than the previous year, with a significant decrease in EBIT (earnings before interest and taxes) and a notable decline in free cash flow from industrial operations compared to the strong levels of 2024. Profits are projected to drop by 10%. Facing this challenging situation, Benz has swiftly introduced a cost-cutting plan aimed at enhancing competitiveness and addressing the complex and volatile market environment.

Market data reveals that Benz's global sales in 2024 totaled 1,983,400 units, a 3% decline. Sales in China fell by 7%, while deliveries in Europe dropped by 3%. Although the U.S. market saw an 8.9% increase in sales, reaching 324,528 units—the highest level since 2017—the overall market demand remains weak. China, as Benz's largest single market, has significantly impacted its performance due to sluggish demand. Additionally, the underperformance of electric vehicle sales in Europe has further dragged down the company's results.

Factors such as reduced sales, lower net prices, and unfavorable vehicle mix have directly impacted the profitability of Benz's passenger car business. In 2024, the adjusted EBIT for Benz's passenger car segment was €8.7 billion, down from €14.3 billion in 2023.

Globally, the automotive industry is becoming increasingly competitive, with numerous emerging automakers rising and making strides in new energy and intelligent technologies, squeezing the market share of traditional luxury car manufacturers. While Benz continues to invest in research and development during its electrification transition, its market responsiveness and product competitiveness still face challenges.

To address the profit decline, Benz has launched the "Next Level Performance" plan, aiming to reduce production costs by 10% by 2027 and permanently save €5 billion, with €2.5 billion expected to be saved in 2025.

Starting in 2025, salaries for E4-level and above management will no longer increase. Profit-sharing for approximately 90,000 employees will be reduced, along with long-service anniversary allowances. The flexibility for employees to choose between additional salary or more free time will be limited, and vacation days will be reduced, with Christmas Eve and New Year's Eve each counting as a full day off.

In terms of labor costs, Benz has implemented a series of measures. In 2024, the company offered buyout packages to some employees in engineering services and commercial vehicle operations and restricted hiring, leaving some vacancies unfilled. In early February, several mid-level managers in the sales department were laid off following a restructuring of U.S. dealer operations. According to media reports, Benz plans to cut costs by approximately 25% in key markets such as the U.S. and China. This global cost-cutting initiative, named Next Level Performance, will affect all business areas of Benz, with some departments expected to see budget reductions of up to 30%. There are even reports that this cost-tightening action could involve up to 20,000 job cuts worldwide.

In the supply chain and production sectors, Benz will continue to work closely with suppliers to address material cost issues, with fixed-cost reduction measures extending through 2027. By optimizing production processes and improving efficiency, Benz aims to enhance the efficiency and flexibility of its global production operations, thereby reducing production costs. The company is also actively exploring new technologies and processes to further cut costs and boost product competitiveness.

In addition to cost-cutting, Benz is actively adjusting its product and market strategies. From a product planning perspective, starting with the new CLA in 2025, the S-Class will undergo a major upgrade in 2026. The fully electric GLC and C-Class, along with several pure electric products and high-tech electrified internal combustion engine products from the Mercedes-AMG series, will be introduced. By 2027, dozens of new or redesigned models will be launched, driving sales growth. Benz will also introduce a new family design language across its entire product lineup, highlighting the differentiated advantages of both pure electric and fuel-powered vehicles while ensuring space, elegance, convenience, and performance.

In terms of market strategy, Benz will further unlock the growth potential of direct sales channels, elevate customer service experiences to new levels, and strengthen revenue quality. Particularly in the Chinese market, Benz will continue to invest, supporting the company's largest-ever product offensive, which includes seven long-wheelbase models specifically designed for the Chinese market.

As a benchmark in the automotive industry, Benz's profit decline and cost-cutting plan have significant implications for the entire sector. On one hand, this reflects the common challenges facing the automotive industry, including changes in market demand, intensified competition, and pressure from electrification transitions. On the other hand, Benz's response strategies provide valuable lessons and insights for other companies.

Looking ahead, if Benz can successfully implement its cost-cutting plan and optimize its product and market strategies, it may regain a competitive edge in the wave of electrification and智能化 (intelligentization). Continued investment in research and development will also drive product innovation for Benz, particularly in the development of the MB.OS operating system and the next-generation electric platform, where the company may achieve breakthroughs.