Mercedes-Benz at a Crossroads: South African Plant Threat Looms as Cost-Cutting Campaign Accelerates
Published on 06/30/2026 at 15:58 | Redaktion boerse-global.de
The trouble at Mercedes-Benz is spreading beyond Germany. News that the company’s assembly plant in East London, South Africa, may be shuttered has added a fresh layer of pressure to a group already fighting to halt a slide in profitability. The facility, which has churned out the current C-Class sedan since 2021, leans heavily on exports. Shifting trade conditions and intensifying competition have fuelled speculation that the site could be closed, forcing the redistribution of roughly 30,000 vehicles annually to other factories. Worker representatives warn that such a move would pile additional production burdens onto existing plants, stretch working hours, and degrade labour conditions.
The South African uncertainty comes at a time when Mercedes is overhauling its domestic operations with unusual urgency. Chief executive Ola Källenius and human resources chief Britta Seeger unveiled a sweeping austerity programme on Tuesday that touches all 110,000 employees in Germany. The group is demanding longer hours without extra pay, slashing bonus payments, and unilaterally postponing a previously agreed tariff bonus from July 2026 to 2027. Administrative functions are to be shifted abroad as part of a broader plan to slim down overheads and boost productivity.
The rationale for such radical measures is laid bare by the first-quarter results. Revenue slipped five percent year-on-year to €31.6 billion, while operating profit tumbled 17 percent to €1.9 billion. The margin in the passenger-car division nearly halved from 7.3 percent a year earlier to just 4.1 percent. The worst blow came from China, where sales collapsed by 25 percent. Gains in Europe and the US were not enough to offset the shortfall. Sluggish demand for electric vehicles and the threat of new US tariffs are adding to the headwinds.
Should investors sell immediately? Or is it worth buying Mercedes-Benz?
In a striking countermove to the EV slowdown, Mercedes is reintroducing V8 combustion engines in the US and China. Looser emissions rules in America and sustained appetite from luxury buyers have made the shift possible. The company hopes the return of the big engines will provide a short-term cushion for margins in its most profitable segments.
The stock market has not been forgiving. Shares changed hands at €43.24 in recent trading, barely above the 52-week low of €42.64 hit just the previous day. Other data put the price at €43.36, roughly two percent above the low. Whichever figure is used, the equity has surrendered nearly 30 percent since the start of the year. The relative strength index stands at 29.7–30, a technical indicator that normally signals an oversold condition. Yet the stock is trading more than 21 percent below its 200-day moving average of €54.94, underscoring the depth of the sell-off. Analysts polled in a consensus estimate peg fair value at roughly €61.20, but the market is waiting for convincing evidence that the restructuring is gaining traction and that the Chinese operation has finally bottomed out.
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