Part of this is due to declining sales in China (driven by competitive domestic EVs there), and a large part is due to the political and regulatory envornoment in the EU/Germany: these automakers are being forced to electrify as ICE vehicles are banned as of 2035, cost of labor in Germany in 4-5x what it is in eastern europe[1], electricity and gas prices (for manufacturing) are through the roof, and VW itself is 20% controlled by the state and being hamstrung by that a bit as well.
[1]MB head of production: "The cost of one hour of labour in production in Germany is in some cases up to five times higher than at locations in Eastern Europe." VW cost of labor per vehicle: 4,850eur in Emden plant vs 1,078eur in Tianjin plant. Sources https://www.electrive.com/2026/11/13/mercedes-board-threaten... https://x.com/stats_feed/status/2109219150157471938
Is that really true ? I would say maybe 2x but 4-5x - where are wages that low in Europe anymore ?
There a line of thinking in Germany that the country worked hard to build itself up post-WW2 and it should now be able to enjoy the rewards. Unfortunately the rest of the world moved on, and all of Germany’s excellent and hard-won prosperity and rights make it less competitive globally.
For decades, Siemens had excellent vertical relations with the German petrochemical, chemicals and materials industries who produced product ingredients that were world-beating on quality and price. The world caught up on quality and price to the point that BASF, Merck, Mayer etc were the inferior option when purchasing, destroying the competitiveness of everything downstream from them.
I don't know enough about Chinese automotive to say whether they've instead outcompeted MB on some other basis, but I do know for a fact that this one sector of the German miracle has gone away.
Not only was the Chinese part 75% cheaper, it also was higher quality.
We also have seen quite a few "domestic" manufacturers that are actually just slapping their label on Chinese made parts. Anyone whose attention snags on oddball stuff and gets things from China will know that distinct Chinese English font that only Chinese companies use. The source of the parts is pretty obvious when the QC stickers are in that font...
Is this what they call disruptive innovation? Interesting to see.
EVs were the future then and especially now. German car manufactures placed poor bets.
It's humorous when folks argue that China subsidized their core industries. Of course they do, that is their culture, and aligns with their target outcomes. This is why they are a leader in the vast majority of frontier technologies [1]. They are not going to tie their hands because wealthy developed nations demand they do for silly economic configurations.
"Great Allocators of Capital" are maybe not so great after all. Maybe they were just lucky until they weren't.
[1] https://news.ycombinator.com/item?id=45496507 (citations)
August 2024:
> Now covering 64 critical technologies and crucial fields spanning defence, space, energy, the environment, artificial intelligence (AI), biotechnology, robotics, cyber, computing, advanced materials and key quantum technology areas, the Tech Tracker’s dataset has been expanded and updated from five years of data (previously, 2018–2022) to 21 years of data (2003–2023).
> These new results reveal the stunning shift in research leadership over the past two decades towards large economies in the Indo-Pacific, led by China’s exceptional gains. The US led in 60 of 64 technologies in the five years from 2003 to 2007, but in the most recent five years (2019–2023) is leading in seven. China led in just three of 64 technologies in 2003–2007 but is now the lead country in 57 of 64 technologies in 2019–2023, increasing its lead from our rankings last year (2018–2022), where it was leading in 52 technologies.
Right... they are too busy selling state assets or allowing local corporations to be taken by private equity or sovereign wealth funds. Which then run them for the benefit of shareholders, or the new owner directly.
Western companies don't exist to provide what consumers want and give them a fair deal anymore. They exist to screw consumers just as much as they can, while taking as much money out for the upper management and paper owners.
This is why there is so much hand-wringing about "China". Chinese companies WANT to give consumers a good deal, they still have a point to prove in high end manufacturing, and obviously the Chinese government would like strong companies they control to project power.
But there is no sign of change to counter this in the West.
Western markets and enconomies have been fully abused by powerful players, they barely pretend to act in the interest of consumers anymore.
Of course, one would hope the (US) government would use the time they bought their industry to try to catch up, rather than developing new V8 pickups.
If legacy US auto is not scaling EV production, why are the tariffs still in place?
https://ember-energy.org/data/ev-sales-tracker/
https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...
The new Porsche CEO definitely knows what he is doing, VW's core brand is also evolving well with the ID Polo, and even BMW has gotten something right with the Alpina acquisition and concept
Källenius on the other hand is responsible for the gigantic commercial flop that is the EQ series. He directed that before becoming CEO and then had to shut it down as CEO because people didn't see the cars as prestigious. And they are right. They look and feel like new Chinese brands. And don't even get me started on the new AMG GT. That is both a hideous and soulless car.
I once had the chance to do sit in an EQS (450somethingorotherdontreallyknow?).
The car had a sticker price of 156k€ (!!!), yet everything just felt _so_ cheap, was squeaky plastic - nothing in that car did warrant the price.
Also, the culture here is extremely risk averse. Add the layers of bureaucracy and the inability to move with time, I expect more and more large companies will succumb to a similar fate.
It feels that the political left doesn't want to see this, it seems that they're unable to see the forest through the trees. Lots of focus on specific topics, barely any holistic visions for the future of the country or the continent.
The political right is quick to blame the immigrants and while it's absolutely reasonable to have concerns about e.g the number immigrants receiving social welfare it's effectively a minor issue compared to the lack of economic growth or the absence of innovation.
Unsurprisingly, export manufacturing based economies are all facing the same decline.
As they lost their special know hows, the advantages are now in the hands of who invests more, diversifies more, has less bureaucracy and is more risk prone.
Labor cost in the east is a fraction of Germany. A Chinese factory worker is gonna work 50h/week for under 20k/year, instead of 35h/w for more than twice that.
But of course it has to be the fact that they pay like 30 bucks less per MWh in China that makes it impossible to compete. German nuclear exit is most certainly the main factor here /s.
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it"
https://www.dw.com/en/mercedes-benz-germany-investment/a-799...
> Mercedes-Benz has decided to halt “all further investments” in Germany and warned that plant closures were now an option, marking an escalation of its stand-off with unions in a bid to reduce labour costs.
> The German premium carmaker has called for longer working hours without extra pay to boost productivity but has failed to reach a deal with its works council despite four months of negotiations.
> In an interview with board members published on the company’s intranet on Thursday, its production head Michael Schiebe said “the current cost structures do not allow us to invest in Germany”.
The article is short and sweet, so I’m wary of copying all of it. It goes on to explain:
* A 35-hour work week is the norm in Germany for automakers, and MB is asking their workforce to change to 40.
* Rising competition for cheaper Chinese automakers is placing new economic pressures on MB.
I hate that we live in a timeline where we keep asking more and more out of people.
We have one life to live.
Stop exploiting people.
If one country can have slaves, and you trade with them, then your country must also have slaves. Otherwise they price out your workers.
We already fought the war that this caused in America (Civil War). China is going to be in a war against slavery soon too.
There cannot be fair trade while one side uses slaves. It's pretty simple.
So if you root for workers, don't also root for China. Their standards for work aren't what you want your workers to compete with.
This is not the case. We have more leisure time and social safety nets than ever before.
In the simplest possible case, back in the 1950s, most households had one paid worker. Today, most households have two paid workers. The per worker number of hours remained flat, but the per adult number of hours worked skyrocketed.
Pre agricultural societies typically worked less.
Medieval peasants worked long days, but it was highly seasonal, and was limited by light. They worked ~1500 hours a year, and put another 5-800 hours into domestic work. Modern Americans will be very familiar with about 1800 hours of labor a year, plus 5-600 hours domestic labor. Plus significantly more errands and transit stacking on a few hundred hours a year. Most Americans push close to 2600 hours a year. But it can go much higher if you factor in childcare (largely kids in medieval times were put to work).
So, your claim of more leisure time is definitely incorrect.
We definitely have better leisure time. And our social safety nets are better (though declining as of late). Quality of life is higher for sure. I'm solely objecting to the claim we have more leisure time.
Trying to get your manufacturing employees to show up more so you can make more money on the fixed costs (benefits, training, etc) is to put a baindaid on a bullet hole that is the modern big enterprise as it exists in the modern economy.
Only 6.4% of institutional and strategic investors are based in Germany. 34.5% are retail investors, and 20% of the German population owns any shares (of any company) at all. So most investors of Mercedes don't have any particular reason to invest in Germany.
They want to reduce cost and the obvious way to do that, is to reduce the work force. That's not an easy thing to do in Germany, because unions and the worker's council are quite powerful.
That production is too expensive in Germany (and therefore halting investments), may be true or not, but stating it officially like in this announcement is mainly a method for forcing concessions from the worker's council.
Then Germany took the dumbfucktarded decision ever: they shut down all their nuclear power plants and they decided to become ultra-reliant on Russia.
In addition to that, the EU took another deeply fucktarded decision: they fucked up the timeline to "move to EV", by giving only 14 years (which is basically development cycles for only two generations of cars in Germany) to German manufacturers to move to 100% EV.
When european car manufacturers were nowhere when it came to EV cars.
So german (and french: and the number in France are terribly bad too) car manufacturers were forced not only to move to EV in a crazy hurry while their know-how was in ICE, but in addition to that due to closing nuclear plants and Russia beginning a war, energy prices rose like mad.
At some point energy price for car manufacturers was 7x higher than in China.
How do you want german car manufacturer to compete when both their own politicians and the EU as a whole teamed to destroy them?
That's what happened: instead of giving a reasonable timeline to move to EV (14 years was way too short and, btw, the EU did move the timeline a bit further now: but they realize too late they were wrong and did too little), the EU made sure energy price rose like mad.
The EU killed the french and german car industry. That's what happened.
Recently the CEO of Airbus explained in front of politicians that if France and the EU kept doing what it was doing, Airbus would suffer the same fate as the french car industry.
When ultra dumb decisions like this are taken, the consequences take some time to show up. First you need a full cycle of development for a new car, then you've got a company like, say, Porsche producing the shittiest Porsche ever, the Taycan, in a seven years development cycle. Then everybody realizes it's a piece of shit and customers want, from Porsche, a 911.
Then you've got even more dumbfucktarded decision: like the Porsche Macan ICE being the absolute best selling Porsche model. And Porsche decide to stop selling ICE Macan and start selling only 100% EV Macan. With batteries shittier than on Tesla or chinese cars.
And so Porsche's benefits, YOY, dropped... 93%.
Ninety-three percent revenu drop.
It's the same for all german car manufacturers: VW is in deep shit, Mercedes is in deep shit, Porsche is in deep deep shit.
And we have to thank the EU bureaucrats for that.
I'm not saying german car manufacturers had to keep selling ICE forever: I'm saying the EU should have made sure they had competitive energy prices for their factories and they should have been given more time for their switch to EV.
P.S: as a sidenote in France while workers at french car manufacturing companies were all concerned about their safety nets and social security and social rights etc., they didn't think that all that wouldn't matter as they'd find themselves completely out of their jobs instead due to the dumb decisions of EU bureaucrats (who seem to be in a hurry to destroy the EU as quickly as they can).
Shutting down the nuclear plants before coal was stupid, but did not make Germany ultra-reliant on Russia. There were plenty of other sources of fossil fuels (Netherlands, Norway Middle East). Unlike gas/oil, Germany is still importing uranium directly from Russia btw.
>When european car manufacturers were nowhere when it came to EV cars.
The decision to phase out ICE in the EU was made in 2022, deliveries of the VW ID.3 started in 2020, and that wasn't the first European EV by a long shot. Sure the vast majority of Europe's car manufacturing was still geared for ICEs, but that statement is wildly inaccurate.
5 years of those 14 have now passed, and while it's true 5y ago they were nowhere to be found on the radar, they are still churning out cars like it's 1980 after 30% of the usable timeline is gone. The boards have no vision how to perform the switch to electric or how to play in an ultra-competitive market where it takes now 2 years from design to selling instead of the usual 10. Otherwise something would have been done by now, like securing some battery supply chain agreements, building fabs or ensuring to give people what they wanted (~500km range for a C segment car). Instead the ID.Polo starts at 23k with 330km range, and we'll still see about reliability, performance and software. Heck, Tesla Berlin took 3 years from breaking ground to mass production, and they still can't make something competitive with the Model 3.
I imagine nothing would have happened for another 10y if the timeline were longer. I believe the intent of the EU was to set a clear direction to follow and to push the industry to go for it, instead the dinosaurs keep finding excuses to protect the status quo and play by the old rules.
I agree with the points about cheap, clean and renewable energy that should have supported this.
The CEO has been a disaster imho.
Took a brand that was "aspirational professional" and tried to make it ten years younger and sportier.
So it took itself from an empty niche, to the very same one occupied by Audi and BMW.
Wrong demographic with the wrong budget.
Reliability has gone downhill, while interiors look like a tacky vietnamese solarium appealing to gamers.
If you want to understand how clueless management is about cars just look at the SL model.
200k for a car that every person with that budget will skip to get a Porsche 911.
I see 911s everywhere, but SLs? They used to make sense at a different budget decades ago, now they are nonsense.
At the same time, China is much better at EVs, and they're sold freely in Europe for less than the Euro carmakers can build them for.
It's a perfect storm. The carmakers are caught in the middle. They have to quickly and radically transform their product portfolio away from what they know, to something they don't know, AND they have to find a way to charge way less for it.
If you compete on global markets, you inevitably compete with global wage levels, and somewhat comparable talent in China demands not even 50% of the wage it would get in Germany.
There is a reason that new car production has been shifting towards lower wage countries for decades now (US=>Mexico, Europe Central=>East).
This situation is gonna get better for countries like Germany once Chinese wage levels have somewhat caught up, but that might still take a while, and other big currently industrializing lower-wage countries might take over that role (like Indonesia or India).
Thank you MB for reminding this to the world.
You kid but when you add up the amount of time a western BigCo worker spends in BS mandatory meetings and trainings and other BS that they don't care about, isn't productive and comes down from above in some misguided attempt to polish the statistics I bet the guy in China is actually spending a lot more time on task.
Labour cost percentage 35.9% Indeed quite high.
https://group.mercedes-benz.com/documents/investors/reports/...
China is killing Germany's car production and has been for a while. It is now just much more obvious, even quality-wise, which used to be a stronghold foundation of german engineering. Expanding eastwards and cutting costs is a losing strategy for Germany - there is a reason why the AfD is gaining momentum, despite their addiction to ultra-right thoughts. Meanwhile, incompetent people such as Merz (old guy, talks big, acts little) fail hard when they meet reality. Guy is now sinking Germany quickly and he has no decency to want to step back and let more competent people at the least try to fix Germany. Meanwhile France is going closer towards bankruptcy. To some extent this is similar to the 1930s era, also aided by Trump cronies and the Putin mafia.
Germany but also the whole EU, needs to completely reconsider what it really wants; and how it plans to achieve that. The china dictatorship makes much more logical decisions - not in all areas, of course, but they pursue a strategy. Systematically. The EU does not really do that. They just claim they do but in reality they do not. Green energy is fine and dandy but if the prices keep on rising, inflation rises as well, then something does not work with that promise.
I can't help but think this was influenced somewhat by the shutdown of Germany's nuclear reactors thus making energy more expensive and all the knock on effects.
How does one come to wonder if they are going to "slowly wind down the business"?
Citing high production costs, they are looking to the US and want to bring costs in Germany down to the production costs in the US.
Nothing about what cuts the management is willing to take.
Which is funny since both are much higher than China. These lagging car industries will only be able to be protected for so long from Chinese EVs like BYD.
My bet (edit: reading other comments I'm glad I didn't put money on it... leaving this comment anyway) based on other cases of this is they are fighting a law (or several laws), and are making this threat as a "change the law to favor us or we will leave and this prove you need us more than we need you".
I don't know how it will work out for them, I've seen it go both ways. I've also seen this stop some really stupid laws, and also stop some really good laws. Without knowing details of what they are trying to do I can't comment on which side I support.
The other parts are:
1. German producers really fucked up with the "electric" revolution and were caught a bit with their pants down by Tesla and especially the Chinese brands.
2. Specific to Mercedes-Benz, I believe the brand failed to attract younger buyers. Personally, I associate Mercedes cars with boomers/older genX folks.
3. Price. In a moment in which affordability is a major issue for the majority of people, the base model of the cheapest car (the A class) starts from 42900 CHF.
And a factory worker in China makes <$20k/year, and will be easily convinced to work longer than 35h/week.
German automakers are simply shifting production to eastern Europe, where there are skilled autoworkers who will happily make cars for 4X less the cost of labor vs. German labor.
While it is true that the work cost is higher than in Poland, even though Poland closed the gap immensely in the last 10 years, the issue is much more deeply rooted. There is no way Germany can now compete with China. This happened to the USA too, decades before, see how Detroit collapsed. China kind of copied the Japanese and South Korean variant while massively upsizing all of that, including integrating key aspects into their work flows. You only need to look at robot factories. You won't find that in Germany much at all. The innovation changed completely.
Mercedes-Benz just tries to shift the blame to lower costs, which is understandable from their point of view, but does not fix the core problem. Even building in Poland or Romania, won't fix the issue with regards to China. That's not the fault of the workers primarily.
Imported natural gas used to cost Germany roughly €12 per megawatt-hour (MWh) at the border
Now wholesale prices have climbed to around €60+ per MWh, roughly FIVE times higher than previous levels.
That's goodbye to Industry in Germany - well except for the War Industry which has state protection and funding and doesn't need to be competitive. And China has become even more cheaper since they pay far less for Russian gas.
I don't know why the very bright guys here on HN have such HARD blinkers on correlation and causation between energy prices and energy-intensive industry. Even Merz himself finally admitted it this year but most HN posters want to put their high-IQ heads into cement rather than admit that stopping Russian gas was one the main causes of the downfall of German industry.
Cars are mostly built by machines.
Until we achieve worldwide socialism where it doesnt matter what is made where, this is how its going to be. National borders will dictate economics and what is best done in those countries. The wealthy west simply cannot compete on manufacturing anymore.