Mercedes CEO Urges Productivity Push as China Hits Profits

Mercedes-Benz chief executive Ola Kaellenius called for Germany to cut costs and raise productivity as the carmaker reported second-quarter results hit by competition in China.

Kaellenius said Mercedes was streamlining its own operations and argued that Germany and Europe needed to do the same to protect industrial competitiveness. He said Germany needed a "productivity offensive" because of international competition, including from China.

Mercedes said overall quarterly net profit rose 13.5 percent to 1.09 billion euros, helped by its vans and financial services businesses. But core earnings at the cars division fell 26 percent to 909 million euros.

The car division figure excludes a 704 million-euro non-cash write-down on Mercedes-Benz's Chinese investments. Including that charge, profit at the Mercedes-Benz car business fell almost 94 percent.

Mercedes said vehicle deliveries in China fell 30 percent in the quarter. The company now expects annual sales to shrink by up to 7.5 percent from the 2025 level of 132.2 billion euros, compared with its earlier forecast for roughly unchanged sales growth.

Finance chief Harald Wilhelm told investors and analysts that the write-down reflected the commercial environment and lower expected profit contribution from Chinese ventures.

Mercedes has set a target of cutting overheads by 10 percent by 2027. Thousands of employees protested this month against proposals to work more hours for the same pay. Kaellenius said sacrifices would be needed and cited what he described as an average 70 percent cost gap between Mercedes operations in Germany and Hungary.

Mercedes-Benz shares rose in Frankfurt after the results.