Mercedes-Benz China's "N+9" compensation plan for layoffs has sparked heated discussion. If the laid-off employees do not join a new company within two months, they can also receive additional salary compensation for March and April.

According to the International Electronic Commerce News, yesterday (February 26), Mercedes-Benz (China) Automobile Sales Co., Ltd. and Mercedes-Benz Auto Finance Co., Ltd. launched a large-scale layoff, with a ratio of up to 15%, mainly affecting the sales and automobile finance systems, and the R&D department has not been affected for the time being.

The layoffs sparked heated discussions with the "N+9" compensation plan. If the laid-off employees do not join a new company within two months, they can also receive additional salary compensation for March and April.

This compensation standard far exceeds that of Volkswagen China (N+6) and Tesla China (N+3) and other automakers, and is called "the conscience of the industry" by netizens, but behind it reflects that Mercedes-Benz is facing severe performance pressure and transformation pains.

Sales in China fall to five-year low

Mercedes-Benz 2024 Financial Information Overview

Mercedes-Benz's 2024 financial report shows that its global revenue is 145.6 billion euros, a year-on-year decrease of 4.5%; its earnings before interest and taxes (EBIT) is 13.6 billion euros, a year-on-year plunge of 31%; and its net profit is 10.4 billion euros, a decrease of 28%.

As Mercedes-Benz's largest single market, sales in China fell 7% year-on-year to 683,600 vehicles, a new low in the past five years. Overall sales in the Asian market fell 7%, sales in the European market also fell 3%, and the German domestic market fell by 9%. Although sales in North America increased by about 8%, it is difficult to offset the decline in other regions.

Mercedes-Benz attributed the decline in performance to the sharp drop in sales in the Chinese market, unfavorable model mix and intensified competition in new energy vehicles. In 2024, its sales of pure electric vehicles were only 185,000 vehicles, a sharp drop of 23% year-on-year. At the same time, Chinese local brands such as BYD, Weilai, and Ideal continue to seize market share with their advantages in electrification and intelligence, further squeezing Mercedes-Benz's living space.

Cost reduction and self-rescue

layoffs and "austerity plan"

Earlier this month, when Mercedes-Benz announced its 2024 annual report, it said it would launch a series of measures such as layoffs, cost reduction and efficiency improvement, product innovation and market strategy adjustments. The layoffs in China are part of the global strategy. In addition, Mercedes-Benz has launched a series of "austerity measures" internally, including freezing the salaries of management above level E4, cutting dividends for 90,000 employees (average dividends of about 7,300 euros in 2023), reducing vacation days and outsourcing some businesses. Mercedes-Benz also plans to adjust its production plan in China, and some models may stop local production, while reducing material costs by 10% by optimizing the supply chain.

Despite the solid cash flow performance (free cash flow from industrial business reached 9.2 billion euros), Mercedes-Benz is extremely pessimistic about its expectations for 2025: global sales and revenue are expected to be lower than in 2024, EBITDA and free cash flow will "significantly decline", and the sales profit margin of the passenger car department may drop from 8.1% to 6%-8%.

Transformation pains

the dual challenges of electrification and localization

Mercedes-Benz is not the only overseas luxury brand in trouble. BMW, Porsche and others are also facing declining sales, and the fierce competition in the Chinese market has exacerbated the difficulty of transformation. Mercedes-Benz plans to launch a number of China-exclusive models in the next three years, including a pure electric MPV and a long-wheelbase CLA, and accelerate the implementation of the "mapless L2 high-level intelligent driving system" led by the Chinese team. These measures are aimed at regaining market confidence through localized innovation.

However, layoffs and cost reduction are only short-term measures. In the long run, Mercedes-Benz needs to achieve technological breakthroughs in the fields of electrification and intelligence, and reshape its brand competitiveness. The company's senior management admitted that the current employee morale has fallen to a low point, and how to balance cost control and team stability has become a key challenge.

Industry revelation

Changes in the automotive industry under the wave of layoffs

Mercedes-Benz's layoffs are a microcosm of the transformation of traditional automakers. As new energy and intelligent driving technologies subvert the industry landscape, overseas automakers are undergoing structural adjustments. Although high compensation has eased the public pressure caused by layoffs, it cannot cover up the deep contradictions of strategic transformation. For Mercedes-Benz, whether it can catch up with Chinese brands in the electrification track and maintain its differentiated advantages in the high-end market will determine its future destiny.

As of press time, Mercedes-Benz China has not yet made an official response to the layoffs.

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