Spending hundreds of millions, Mercedes-Benz launches the "Broad Entry Plan"

Author | Chai Xuchen

Editor | Wang Xiaojuan

Mercedes-Benz's extravagant "Broad Advancement Plan" has shocked the automotive industry.

Recently, Mercedes-Benz Group plans to spend billions of euros to launch a voluntary resignation program, offering voluntary resignation compensation plans to 30,000 employees.

Currently, employees can estimate their resignation compensation amounts through the intranet. For example, a middle manager with 30 years of service and a monthly salary of 80,000 RMB could receive a severance payment of over 4 million RMB if they choose to leave; a regular factory worker could also receive compensation equivalent to two years' salary.

Some domestic netizens jokingly said that this is Mercedes-Benz giving employees a "life restart experience card," allowing them to retire early or travel with this money. The management of Mercedes-Benz stated that this severance pay is not only an acknowledgment of employees' hard work over the years but also a guarantee for their future lives.

However, this record-breaking compensation in the automotive industry reflects not the company's generosity but a life-and-death transformation struggle, as can be seen from Mercedes-Benz's financial report last year.

In 2024, Mercedes-Benz faces a dual squeeze of declining profits and market loss: revenue of 145.6 billion euros, down 4.5% year-on-year; net profit of 10.4 billion euros, plummeting 28.4%; gross profit margin falling below the psychological barrier of 20%, with the root of the problem pointing directly to its largest single market—China.

This year, Mercedes-Benz's sales in China fell 7% year-on-year, with pure electric vehicle sales dropping 23% year-on-year, suffocated by local brands like Nio and Li Auto. Once proud of its "brand premium," Mercedes-Benz now has to reduce the terminal price of some models by over 100,000 RMB to maintain market share.

The deeper crisis lies in the fact that the decline of traditional fuel vehicle business is far exceeding expectations. Mercedes-Benz's pure electric vehicles are expected to deliver only 185,000 units in 2024. Market share is continuously being eroded by new energy vehicle companies like Tesla and BYD, and profit margins are being consistently squeezed, making a major transformation urgently needed for Mercedes-Benz.

Mercedes-Benz has not been without attempts at transformation. The new CLA model planned for launch in 2025 and the pure electric GLCSUV in 2026 showcase its ambition for electrification; the Chinese R&D team, with over 2,000 people and an investment of 10.5 billion RMB in the past five years, further highlights the strategy of "in China, for the world." However, the problem lies in the fact that the large body of traditional automakers struggles to adapt to the pace of the new track.

On one hand, the supply chain system, production processes, and talent structure accumulated during the internal combustion engine era have become heavy burdens in the electrification era. Workers at Mercedes-Benz's German factories primarily possess skills in mechanical manufacturing, while there is a severe shortage of talent in batteries and software required for electrification.

On the other hand, the drawbacks of redundant management levels and slow decision-making have been exposed in the competition for smart vehicles. While Huawei's ADS intelligent driving system has achieved autonomous driving on urban roads, Mercedes-Benz's L3-level autonomous driving is still limited to specific highway scenarios. This generational gap forces Mercedes-Benz to reduce its workforce and save 5 billion euros in costs by 2027 to fund R&D However, due to previous agreements, existing administrative personnel will not be directly laid off before 2034. Therefore, Mercedes-Benz can only find alternative ways to seek maximum flexibility within the institutional framework, using generous severance packages to encourage employees to voluntarily resign.

It is understood that this plan by Mercedes-Benz will cover multiple factories in Germany, primarily targeting employees engaged in the research and production of traditional fuel vehicles. Insiders reveal that the company plans to reduce certain positions through voluntary resignation compensation and early retirement schemes, while shifting resources towards electrification, software development, and artificial intelligence.

Mercedes-Benz CEO Ola Källenius's statement is significant: "Generous severance pay is intended to support employees during the transition period. The company hopes to encourage those willing to retire early or seek new career opportunities to voluntarily leave, thereby creating space for the company's future development."

The management of Mercedes-Benz has also made it clear that if employees choose not to accept the severance plan, the company will not force layoffs. At the same time, the company reserves the right to refuse participation in the plan for certain employees, especially those in key positions or top talents with high value.

It is evident that this "severance pay" is actually a strategic investment, shifting resources from traditional departments to electrification and intelligence fields. Mercedes-Benz plans to outsource functions such as finance and human resources and stop replacing retired employees, thereby releasing 10% of production costs annually.

As the largest single market for Mercedes-Benz globally, it is still unclear whether the China region will be included in this adjustment. However, prior to the global voluntary resignation plan launched by Mercedes-Benz, the Chinese market had already quietly initiated layoffs.

On February 26, Mercedes-Benz China held discussions with some employees and immediately started the layoff process, with a layoff rate of about 15%. This round of layoffs mainly involves the sales and automotive finance systems, with the main entities being Mercedes-Benz (China) Automotive Sales Co., Ltd. and Mercedes-Benz Automotive Finance Co., Ltd., while the research and development system has not yet been affected.

This move by Mercedes-Benz is also a reflection of the collective anxiety in the German automotive industry.

In recent years, Germany's manufacturing advantages have diminished, with giants like Volkswagen and Audi reducing production and laying off employees. Amid the wave of digital transformation, the German automotive industry is slow to adapt, falling behind competitors in the new energy sector.

Mercedes-Benz's "severance plan" is merely a prelude to the major transformation of German manufacturing. Recently, Audi Group also sent an email titled "Happy Separation" to all employees, revealing an agreed-upon layoff plan with the company union, expecting to cut about 7,500 jobs in Germany by 2029, with some employees receiving "N+10" compensation.

A report by Boston Consulting points out that the labor structure of traditional car manufacturers is undergoing "dual pressure": on one hand, the demand for internal combustion engine-related positions is decreasing at a rate of 5%-8% per year; on the other hand, the demand for software engineers, battery experts, and other positions continues to grow, intensifying the talent competition.

Behind this adjustment in human structure is the reconstruction of the automotive industry's value chain.

Morgan Stanley points out that in the era of smart electric vehicles, the proportion of software development costs has surged from 10% in traditional cars to 40%, while the value proportion of mechanical manufacturing has correspondingly declined. This shift forces car manufacturers to reshape their talent matrix—Mercedes-Benz's recent establishment of an AI laboratory in Silicon Valley and the formation of a hundred-person in-vehicle systems team in Berlin are testament to this strategic shift At present, Mercedes-Benz's billions of euros in severance pay is both a farewell to the past and a bet on the future. If the goal of saving 5 billion euros by 2027 can be achieved, it may win a transformation window; however, if the electrification and intelligent layout fall short of expectations, this money could become a sunk cost.

The bigger suspense lies in whether the launch of similar plans by German giants like Volkswagen and BMW means that the entire European automotive industry has entered a period of strategic contraction. Meanwhile, on the other end of the Eurasian continent, Chinese car companies are accelerating industry integration through "alliances and collaborations." This competition concerning the future of the automotive industry may have just begun