- Mercedes-Benz faces growing competition from Chinese automakers.
- The company needs to boost productivity and cut costs in Germany.
- US tariffs cost Mercedes-Benz more than $1.1 billion in 2025 alone.
Mercedes-Benz could join Volkswagen as the latest German automotive juggernaut forced to close local production plants that it no longer views as competitive. Such moves would be hugely controversial for the century-old brand and signify the ongoing struggles across Germany’s manufacturing sector.
Mercedes production chief Michael Schiebe spoke with workers at the brand’s Sindelfingen plant earlier this week, stating that the firm’s “clear goal is to maintain all of our German locations.” This statement had a major caveat. “If we are unable to do this, we will have to close one German assembly plant and one German powertrain plant,” he said.
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It’s believed that Mercedes needs to agree to new cost measures with the IG Metall union, which represents thousands of employees at the company. In addition, “we need framework conditions that boost productivity in Germany,” Mercedes confirmed in a statement issued to Reuters.
Union Responds
The prospect of two possible plant closures has not gone over well with IG Metall representatives.
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“Threatening plant closures is no way to shape the future,” the union said. “Anyone who resorts to such threats must expect our determined resistance. If the management board believes it can pressure employees with the ultimatum of ‘concessions or plant closures,’ our answer is a clear ‘not on our watch’.”
Schiebe provided no indication as to which of its German assembly and powertrain facilities are under threat. It currently operates seven powertrain plants in Germany, in addition to three vehicle assembly sites.
Mercedes-Benz’s struggles are similar to those being experienced at Volkswagen. A recent report suggests that the VW Group is considering the closure of four German plants between 2031 and 2034.
The Rise Of China
Both brands have been hit hard by increased competition from Chinese car manufacturers, including BYD, Geely, GAC, Changan, and others, whose vehicles often significantly undercut those from Mercedes and its traditional European rivals.
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In the second quarter, Mercedes sales in China plummeted 30%, and it booked an $800 million impairment in the market. In addition, high tariff costs have hampered the company. In 2025 alone, the automaker took a $1.1 billion hit from US tariffs.
