Mercedes CEO unveils ‘100% China for China’ strategy

Mercedes-Benz is overhauling its business in China, its largest single passenger-car market. Chief Executive Ola Källenius said on Wednesday, November 11, that the hybrid production model that once worked for the automaker in China has stopped working. Under that model, Mercedes split production between regional sites and then completed final assembly in China for local buyers. Källenius made the remarks at a Sueddeutsche Zeitung forum in Berlin, Bloomberg reported.bloomberg.com

The company is now following what it calls a "100% China for China" strategy. The new electric E-Class will be the first model built in China under the plan, with production due to begin in the second half of 2027, Quartz reported.qz.com

A market under pressure

"We, and anyone else who wants to be a global player, will have to adapt the entire business system, because a competitive fight is taking place in China among more than 100 brands," Källenius said, according to Europa Press. Company figures show Mercedes' China car sales fell 31% in the third quarter to 86,792 vehicles. Its global car sales fell 8% to 407,232 units. At an Automobilwoche conference earlier the same day, Källenius said China's overall car market had shrunk 22% so far in 2026 and the luxury segment had fallen 30%, TipRanks reported.tipranks.com+3

In late October, Mercedes cut its 2026 adjusted return-on-sales outlook for its cars division to 2% to 3%, down from 3% to 5%. It cited the tougher Chinese market and higher material costs. That made it the third major German carmaker to lower its guidance, after BMW and Volkswagen. All three have struggled against local rivals such as BYD and Xiaomi, AFP noted. Caixin reported that the plan includes sourcing components locally for vehicles built in China.reuters.com+3

Staying put, cutting at home

Källenius said leaving China would be a mistake, even though consumers there remain "very, very cautious." "It would be completely illusory to think you can break that apart so we have to cooperate intelligently," he said of the global auto industry.europapress.es+1

The overhaul is adding to tension in Germany. Management is seeking longer working hours without extra pay and plans a voluntary buyout program in December. Källenius said that if German factory costs are indexed at 100, U.S. costs sit near 80, and Mercedes needs to bring German costs down to that level.qz.com

"We can't hide anymore," he said. "If we're not ready to take a significant leap then we'll have clearly less industrial activity in this country in 10 years' time."