Mercedes set to cut jobs in China as local competition heats up

Mercedes-Benz Group and its subsidiaries are planning to cut up to 15 percent of the automaker’s workforce in China, mainly within its financing and sales units, as the German manufacturer faces intensifying competition in the world’s largest car market, according to two people familiar with the matter.

Mercedes-Benz Automobile Finance and Beijing Mercedes-Benz Sales Service are set to bear the brunt of the job cuts, said the people, who asked not to be identified because they’re not authorized to speak publicly. The units are struggling to compete with Chinese institutions, including state-owned banks, that can offer more attractive car loans to buyers, one of the people said.

The automaker has already begun job cuts, including not renewing contracts for some fixed-term staff, but the layoffs have accelerated this month, according to the people. Mercedes-Benz’s plans are subject to change and the company is yet to make a final decision on the scope of the layoffs, which may fall short of 15 percent of the workforce, they said.

It’s unclear whether the move will affect the automaker’s local head office or the production units it runs through joint ventures with Chinese firms. Mercedes-Benz Group China said in a statement to Bloomberg News that it’s worked with employees to adjust operations based on the competitive environment and market demands.

Mercedes’ decision shows the struggles facing foreign carmakers in China. Major legacy brands have swiftly lost ground to a wave of agile domestic marques, led by BYD (1211), that have won over drivers with their quicker-to-market and tech-laden electric vehicles. An economic downturn has dealt an additional blow, with Chinese consumers growing more cautious about spending their money.

The German automaker isn’t alone in looking to streamline its presence in China. Last year, local media reported layoffs at Porsche’s Chinese unit. Meanwhile, BMW’s China unit didn’t renew contracts with some employees last year, affecting between 2 percent and 5 percent of its workforce, and has plans for a similar move this year, according to a company spokesperson.

Mercedes said last month that sales in China dropped 7 percent last year, dragging down global deliveries.

BLOOMBERG