Mercedes-Benz China initiates cost reduction and efficiency enhancement: Introducing the OKR system, and inefficient production lines may be shut down | Exclusive from 36Kr.

Under performance pressure, Mercedes-Benz has started to cut costs and increase efficiency.

36Kr has learned from multiple sources that Mercedes-Benz China has announced several adjustment strategies.

Among them, the R & D center will gradually start to adopt the OKR (Objectives and Key Results) assessment system to conduct a more clear job assessment of employees; the production department is adjusting the production lines, including considering merging some less efficient production lines.

Regarding the above news, 36Kr sought verification from Mercedes-Benz. The official response from Mercedes-Benz is: "The employee performance evaluation system of Mercedes-Benz China has not been adjusted", "In the R & D department of Mercedes-Benz in China and Beijing Benz, we are making necessary adjustments to prepare for bringing a series of new products to be produced in Beijing Benz to Chinese customers".

R & D + Production + Sales, Mercedes-Benz's Comprehensive Actions

Previously, the R & D department of Mercedes-Benz China already had an assessment system, and employee performance was linked to the year-end bonus. However, an insider told 36Kr that the year-end bonus of Mercedes-Benz is a "big pot" system, "The difference in the year-end bonus is just a few hundred yuan", and the old system did not have mandatory and specific indicators, "For example, reaching a certain number in a quarter, and almost no employee will get the worst performance".

The newly adopted OKR assessment system will be first implemented in the Shanghai R & D center of Mercedes-Benz, which focuses on intelligent technology, and the Beijing R & D center will follow. "The purpose of the reform is definitely to improve work efficiency, but it is not excluded that the bottom elimination will be carried out according to the new assessment system," a relevant person told 36Kr.

The cost reduction and efficiency increase in the production department are mainly reflected in the efficient utilization of the production lines.

Mercedes-Benz has two factories in Beijing. The Yizhuang factory is mainly responsible for the production of the long-wheelbase versions of the C-Class, E-Class sedans, and the SUV model GLC. The factory's output in 2024 exceeds 400,000 vehicles. The new long-wheelbase pure electric CLA, which Mercedes-Benz will launch this year, will be produced in the Yizhuang factory.

The Shunyi factory is responsible for the production of four pure electric vehicle models: EQA, EQB, EQC, and EQE. Mercedes-Benz has publicly stated that the localized GLE model will also be produced in the Shunyi factory. The factory's output last year was less than 100,000 vehicles, and the newly launched GLE model, due to its high price, may also have difficulty bearing the sales burden.

Today, when various manufacturers are pursuing efficient production, Mercedes-Benz's rich product line has caused certain cost pressures on the production side. Increasing the production capacity of best-selling products and merging inefficient production lines will become the main actions of Mercedes-Benz on the production side.

In addition, the sales department of Mercedes-Benz China publicly stated at a communication meeting in January this year that in 2025, its dealer network will also undergo strategic optimization, including but not limited to actively optimizing the retail network layout and streamlining product categories, etc.

In addition, according to German media reports, Mercedes-Benz globally will start layoffs, and the total number of layoffs may be as high as 20,000.

From the German headquarters to the China region, from R & D, production to sales, Mercedes-Benz has indeed started the business chapter of cost reduction and efficiency increase. Facing the constantly changing market, the century-old car company is also preparing for the future.

Coping with Future Competition, Mercedes-Benz Hopes to "Save" Ammunition

In the just-passed 2024, the total sales volume of Mercedes-Benz is still considerable, but compared with last year, it is difficult to hide the downward trend.

In the Chinese market, Mercedes-Benz sold a total of 714,000 new vehicles (including Mercedes-Benz passenger cars and light commercial vehicles), ranking among the top three in the luxury brand sales list. However, compared with the 765,000 sales last year, it decreased by 6% year-on-year. This is the second consecutive year that Mercedes-Benz China's sales have declined.

The global sales of Mercedes-Benz in 2024 were 1.98 million vehicles, a year-on-year decrease of 3%. Among them, the US market achieved a year-on-year growth of 9%. However, the sales in the Chinese market decreased by 7%, and the sales in Europe decreased by 3%.

The financial report shows that in the first three quarters of 2024, the net profit of Mercedes-Benz was 7.806 billion euros, a year-on-year decrease of 31.4%. As Mercedes-Benz's largest single market, the decline in sales in the Chinese region has had an important impact on its global performance and profits.

Currently, the main sales models of Mercedes-Benz are the C-Class, GLC, and E-Class. Among them, the new long-wheelbase E-Class with a guide price of 447,200 yuan achieved a sales volume of 145,000 vehicles in 2024.

According to the plan, the important new vehicles of Mercedes-Benz China in the next two years are the long-wheelbase pure electric CLA to be launched in 2025 and the domestic version of the GLE to be launched in 2026.

The pure electric CLA is the first work of Mercedes-Benz's MMA platform, which is a compact car platform that can be both fuel-powered and electric. Although the CLA will be equipped with an L2+ advanced intelligent driving system that supports the function from parking space to parking space and a new operating system MB.OS that supports intelligent voice, the compact coupe is not the mainstream model favored by Chinese consumers.

For the GLE model, the price advantage brought by the first realization of localization is indeed an attractive point. However, the guide price of the imported GLE is as high as 699,800 yuan. Its competitor, the BMW X5, has reduced its price by 60,000 yuan after being localized. After the price reduction of localization, the Mercedes-Benz GLE will still be a luxury SUV for a small number of consumers.

36Kr previously reported that after the MMA platform, Mercedes-Benz has planned a newer pure electric platform, targeting the medium to large vehicle positioning. However, according to Mercedes-Benz's R & D rhythm, the earliest time for the new vehicle to be launched will be at least 3 years later.

In the short term, the most powerful sales pieces of Mercedes-Benz in the Chinese market will still be the three fuel vehicles: the C-Class, GLC, and E-Class.

However, the new vehicles of independent brands are targeting the three flagship products of Mercedes-Benz. Mercedes-Benz needs to maintain sales, maintain the brand perception of Mercedes-Benz in the Chinese automotive market, and strive for survival time for more powerful new vehicles in the future.

This round of cost reduction and efficiency increase in the China region is the first move of Mercedes-Benz to "save money for survival".

According to the plan of Mercedes-Benz headquarters, by 2027, Mercedes-Benz globally is going to achieve a financial goal of saving 5 billion euros, and this goal will be completed by 50% in 2025, that is, 2.5 billion euros, approximately 18.8 billion yuan.

This is not a simple number. Cost reduction and efficiency increase will become the phased problem that Mercedes-Benz will face in the next two years. Although it is difficult for a big company to slim down, Mercedes-Benz obviously has the determination and direction.