Mercedes-Benz China wants to overcome the “midlife crisis”

Mercedes-Benz is still the king of the world’s high-end car brands, but challengers are eager to replace them.

Recently, the test of the Zunjie S800 compared to the Mercedes-Maybach S680, a brand owned by Mercedes-Benz, has been abuzz. Although motorists are aware of the twists and turns, a new model wants to gain attention by challenging Mercedes-Benz. It is also enough to see that any car company trying to crack the high-end car market must recognize Mercedes-Benz’s status.

It will be difficult for challengers to shake Mercedes-Benz’s mentality among consumers for a while, but Mercedes-Benz also has its own troubles.

On February 25, Mercedes-Benz China held an employee meeting, and Kang Linsong, Chairman of the Group’s Board of Directors, personally attended the meeting. Such high specifications generally mean that there will be a big move. Sure enough, news of the layoffs of Mercedes-Benz China immediately spread on social platforms.

According to sources, the layoff ratio is about 15%, which mainly involves two systems: sales and auto finance. The layoff compensation is N+9. If the layoff person does not join the new company in the next two months, he can get an additional salary in March and April. It was disclosed that a large proportion of employees who were laid off had open-ended labor contracts.

This news immediately sparked heated discussions. Some netizens envy the layoffs given by Mercedes-Benz, but more people lament the embarrassing situation of German cars in China.

Mercedes-Benz China subsequently confirmed the news of personnel changes. Officials said: We will adjust job settings based on business needs and learn new skills with employees, and integrate or reduce redundant and repetitive positions. rdquo;

In fact, the turmoil in Mercedes-Benz China has long been traced.

In December 2024, Mercedes-Benz announced personnel changes to the board of directors. Tang Shikai, who is responsible for Greater China business, will be transferred to the post of special representative of China affairs in February 2025 and retire after the contract expires. Tong Oufu, the current head of product strategy and planning at Mercedes-Benz, will succeed Tang Shikai as a member of the board of directors from February 1, 2025.

Tang Shikai has been at the helm of Mercedes-Benz China for 12 years and has experienced earth-shaking changes in China’s automobile industry. Kang Linsong spoke highly of Tang Shikai’s performance. ldquo; Together with his team, he has promoted the three-fold growth of our sales in China, significantly expanded the local production network and R & D capabilities, and built a capable and outstanding China team.& rdquo;

This affirmation comes more from years of accumulation, but in fact, Mercedes-Benz’s performance in China in 2024 is a disaster.

01

In January this year, Mercedes-Benz released 2024 car sales data. Mercedes-Benz global sales reached 2.389 million units, down 4% year-on-year. In terms of market segments, sales in Europe were 641,800 units, down 3% year-on-year; sales in the North American market were 365,400 units, up 8% year-on-year; and sales in the Asian market were 892,000 units, down 7% year-on-year.

Specific to the China market, Mercedes-Benz’s sales in 2024 will be 714,000 units, down 6.7% year-on-year, making it the single market with the largest decline in the world. Although the official promotion of Mercedes-Benz focuses on winning the sales championship of luxury brands, the decline in scale is a more objective data. In terms of proportion, the performance of the China market has dragged down the overall performance of the group.

Without price reduction promotion, Mercedes-Benz China’s performance in 2024 may be even worse, but the price reduction has made Mercedes-Benz old users feel chilling.

With the decline in sales, Mercedes-Benz’s revenue in the China market also naturally declined. In 2024, Mercedes-Benz’s revenue in the China market will be 23.139 billion euros, a year-on-year decrease of 8.5% from 2023 ‘s 25.284 billion euros.

More importantly, Mercedes-Benz does not see any hope of turning around the decline in the short term. According to performance guidance, Mercedes-Benz Group expects revenue and car sales in 2025 to be slightly lower than in 2024, and EBITDA and free cash flow will be significantly lower than in 2024.

At the earnings conference, Kang Linsong said: In order to ensure the company’s competitiveness, we are taking measures to make the company faster, leaner and stronger. rdquo;

According to reports, Mercedes-Benz has launched the Next Level Performance savings plan to permanently save 5 billion euros by 2027 and approximately 2.5 billion euros by 2025 through measures such as layoffs, optimization, and production line adjustments.

Everyone can expect that the adjustment of management and the pressure on performance will mean that Mercedes-Benz China will usher in a round of reshuffle. However, such a drastic cut directly from the headquarters is somewhat unexpected and shows Mercedes-Benz’s determination to remain firm without breaking.

02

Tang Shikai is rated by the domestic auto media as the German who understands China best. He not only brings the demands of the China market he has researched to his German headquarters, but also takes Kang Linsong to visit various parts of China every year for a month.

During his tenure, Tang Shikai covered Mercedes-Benz China’s business layout to the entire automobile industry chain, from production, sales to research and development, with a total investment in China exceeding 100 billion yuan.

“I am a firm China optimist.& rdquo; Tang Shikai is very good at handling and balancing various relationships, and Mercedes-Benz is indispensable in almost all official cooperation occasions. To some extent, the problems faced by some foreign companies in China do not exist in Mercedes-Benz. Mercedes-Benz also expressed its support for China in a timely manner on sensitive issues such as the EU’s tariff increase on electric vehicles imported from China.

In fact, the management of Mercedes-Benz is very aware that the current problem facing Mercedes-Benz does not lie in the general environment of the China market, but that established car companies have not kept pace in the process of new energy and intelligent transformation.

Kang Linsong admitted: China is not only the world’s largest automobile market, but also the most dynamic market. Especially in terms of innovation speed, new energy vehicles and intelligent transformation, China can be said to be the fastest pace market in the world entering the new era of the automobile industry. rdquo;

Tang Shikai even bluntly said that what Mercedes-Benz needs to do most now is to persuade target users to like Mercedes-Benz electric vehicles as much as they like fuel vehicles.

After many years of deep cultivation, Mercedes-Benz has established a high-end business brand image in the China market. However, in the intelligence-led new energy revolution, such overly mature product positioning has slowed Mercedes-Benz down.

A third-party survey shows that among high-end car consumers under the age of 30, the proportion of high-end car consumers choosing Mercedes-Benz as the preferred brand has dropped from 28% five years ago to 15%.

With the expansion of the domestic automobile market, the number of female car owners who own private cars has increased significantly. Among the three German giants BMW, Audi and Mercedes-Benz, Mercedes-Benz’s appearance has the lowest recognition among female consumers. In addition, the steering wheels of many Mercedes-Benz models are heavier and are relatively dull to drive, which is not in line with women’s need for lightness and flexibility. The demand for driving has led to the even popular saying of driving a BMW and riding a Mercedes-Benz.

The price war among automakers and the increasingly diversified product line of new energy models have also played a certain negative role in Mercedes-Benz, which is positioned at a high-end level.

In fact, Mercedes-Benz has had a high sense of presence at new energy conferences in recent years, but most of the time it is playing a role as a foil for new products. Coupled with the rapid spread of Short Video platforms, Mercedes-Benz’s outdated cognition has spread subtly.

In January, Mercedes-Benz China executive Duan Jianjun directly criticized the marketing methods of his peers at the forum. He claimed that Mercedes-Benz would not fear or reject the benchmarking because the benchmarking strengthened Mercedes-Benz’s luxury perception and status, but Mercedes-Benz rejected unreasonable and wrong benchmarking.

Although he did not directly name the name, everyone knew which model he was talking about to compare with the Maybach S-Class. Duan Jianjun also said that the automobile industry must coexist and prosper together and cannot engage in cruel competition in a zero-sum game.

Everyone has their own conclusions. The current situation is that compared with the previous generation, the new generation of young consumers in China no longer only pursue foreign car brands. The more abundant and diversified choices and the tide of price cuts have also made consumers unwilling to pay a premium for car brands, but pay more attention to the technological sense and intelligence of cars.

Domestic brands are far more efficient than foreign companies in meeting consumer demands in a timely manner.

03

“There is no word no in the vocabulary of China companies, and they always seek solutions immediately. This spirit has given us a lot of inspiration.& rdquo;

Kang Linsong very much recognizes the ability of domestic new energy to solve problems. However, Mercedes-Benz believes that its relatively slow speed is to improve quality. R & D and testing require time to polish, and it is not that its technical capabilities cannot keep up with competitors.

Mercedes-Benz even appeared in Chinese volumes in the PPT of the earnings conference.“” Xue Fuming, chief technology officer of Mercedes-Benz, interpreted the meaning of involution and emphasized that Mercedes-Benz will not make irrational decisions for something that cannot evolve no matter how hard it works, and does not want to enter a vicious cycle.“”

“Steady and resilient is the key word in Mercedes-Benz’s financial report. In 2024, the free cash flow of Mercedes-Benz’s industrial business will reach 9.2 billion euros. In contrast, the free cash flow of many new forces is negative.

A century of accumulation in the automobile industry has given Mercedes-Benz the confidence to not work as hard as the new forces. If emerging brands cannot seize the market, they are likely to quickly fall into the dilemma of company collapse. However, Mercedes-Benz has the confidence to fight a protracted war and drag out the battle line. The longer it is, the more favorable it will be for it.

Before leaving office, Tang Shikai also emphasized in an interview that Mercedes-Benz was patient enough. He believed that China’s high-end consumer confidence would gradually recover and grow with the wealth effect.

Young people represent the future, and products need to be younger. The choice of the new person in charge of China also shows Mercedes-Benz’s adjustment.

Tang Shikai’s successor, Tong Oufu, was born in 1984 and joined Mercedes-Benz in 2007. He is regarded as one of the representatives of the young people within Mercedes-Benz. Previously, he was responsible for the development of Mercedes-Benz passenger car products, which means that he led the overall planning of the Mercedes-Benz Group’s future model lineup.

Compared with his predecessor, Tong Oufu lacks local experience, but has a better understanding of products and intelligence. How to make good use of the entire chain built by Tang Shikai to do product positioning and precise marketing, and make users like Mercedes-Benz trams is his most important task.

In order to reverse performance, Mercedes-Benz announced the launch of the most powerful product and technology offensive in history, introducing a new family design language and a range of smart technologies. As part of the plan, seven exclusive models will be launched in the China market in the next three years, covering pure electric, plug-in and hybrid fuel-driven versions. Mercedes-Benz’s focus remains on the luxury car market and high net worth users. According to statistics, Mercedes-Benz’s market share exceeds 50% in the domestic high-end car market, reflecting strong user stickiness.

This year, Mercedes-Benz will launch a new CLA. According to Mercedes-Benz, this is the company’s first software-defined model. Driven by its self-developed MB.OS architecture, the MBUX virtual assistant equipped with multi-agent AI applications may be able to wash away the stereotype of Mercedes-Benz’s old-fashioned style.

To be fair, Mercedes-Benz is not arrogant in China, but very pragmatic. All changes occur to solve problems. As for whether the market and users recognize it, it will take time to give an answer.

Fortunately, Mercedes-Benz still has time, and the challengers are too eager for success.