Mercedes-Benz will stop investing in passenger car manufacturing in Germany and has left the door open to closing plants, as it negotiates with unions over cutting labour costs. The company confirmed the position in an internal interview with board members released on Thursday, with production head Michael Schiebe saying the current cost structures do not allow investment in Germany.
Two German plants are understood to be at risk, though Mercedes has not named them publicly. The comments came in an interview with board members that was released internally, and were first reported by the Financial Times.
Why Mercedes says the money stops in Germany
Mercedes is asking employees at its German plants to work 40 hours a week without extra pay, five hours above the standard for the German automotive sector, arguing that German labour costs are too high next to Eastern Europe and the US. Labour costs in Germany can run as much as five times those at other plants in Eastern Europe.
The squeeze is showing in the numbers. Mercedes expects returns of just 2% to 3% this year, against the double-digit projections it had hoped for. Heavy spending on EVs has not paid off as quickly as expected, with adoption slower than forecast in Europe and the US, while passenger car sales in China, its largest market, fell 31% in the third quarter of 2026.
The company is in the middle of negotiations with Germany's IG Metall union and the Mercedes General Works Council, and the unions have vowed to fight any closures. That standoff is the reason the investment freeze is a negotiating position as much as a financial one: Mercedes needs the works council to accept longer hours without extra pay, and holding German investment hostage is its strongest lever.
Which plants are exposed
Mercedes assembles passenger vehicles at three German sites: Sindelfingen, with 31,500 employees, Bremen with 10,500 and Rastatt with 7,000. It runs seven further German plants, including Untertürkheim in Stuttgart, Berlin and Hamburg for drivetrains and components, Düsseldorf and Wörth for commercial vehicles, Kamenz for lithium-ion batteries and Affalterbach for AMG.
Schiebe has previously indicated that two German plants are on the chopping block, though the company has not confirmed which.
Hungary is the obvious landing spot for any shifted production. Mercedes has invested heavily in its Kecskemét plant, which employs 5,000 people, is one of the largest employers in the region and builds internal combustion, plug-in hybrid and electric passenger vehicles, including the current GLB, A-Class and C-Class electric models. Outside Europe the company has plants in China, South Africa and the US, plus knock-down assembly joint ventures in India, Thailand, Malaysia, Indonesia and Vietnam.
The catch for buyers is that the cars themselves are unlikely to change much: Kecskemét already builds electric Mercedes models, so moving more output there is a cost decision rather than a product one.
A wider German problem
Mercedes is not alone in retrenching. Volkswagen is in similar financial trouble and last month paused development of the ID Golf. For German car buyers, the risk is less about what they can order today than about where the next generation of models is built, and whether the cost savings show up in prices or simply in the company's margins.
What is still undecided
No closure has been confirmed. The two plants at risk have not been officially named, and the outcome depends on talks with IG Metall and the works council, which are ongoing. Mercedes has not announced a date for a final decision on closures, so the timing of any shutdown remains open.
