Bad news for the employees at the Mercedes factory in Sindelfingen, Germany. The fully digitalised plant opened four years ago and has been operating in two shifts ever since. That will be over at the end of the summer: Factory 56 will be operating in one shift for the first time.
The affected models are the Mercedes S-Class, but also the EQS and the Maybach and AMG versions that are also manufactured at the factory. “It is planned to transfer production at Factory 56 to a single-shift operation in the fourth quarter and to deploy some of the employees to other production areas of the plant,” a Mercedes spokesperson told the German publication. Car Week.
All production cuts can be explained by the same reason: falling sales. This was the case for Mercedes’ most luxurious models in the second quarter. In addition to the S-Class and EQS sedans, their SUV variants, the EQS SUV and the Mercedes GLS, also failed to perform. Combined sales of these four models were 33,400 units between April and June. The previous year they had been 44,200 units, a drop of almost 25%.
The plant has been used well below its capacity in recent months. Obviously, if sales in the luxury segment fall (they now account for 16% of the business, two points less than a year ago), the profit margin of the business also falls: in the second quarter it fell from 13.5% to 10.2%.
Sales of the S-Class fell in all major Mercedes markets during the first half of the year. Above all in Europe, -27% (also in China and the United States, its main markets). It is a blow that Ola Kallenius, CEO of Mercedes, will have to deal with. There has been much talk at times about the hesitant approach to high-end models (especially electric ones) and the high development costs, as well as the price war.
Blow to suppliers and dealers
There is already talk that the reduction to one production shift will have little impact on the employees in Sindelfingen. Most likely, they will be moved to three-shift production lines for the E-Class and GLC. The situation is worse for temporary workers – who will probably be laid off.
It is not only the brand that is suffering from poor sales. A director of a major supplier of interior components for the S-Class (who wishes to remain anonymous) told Automobilwoche that “the reduction in vehicle production is a catastrophe.”
The same source reports that a dealer in the Stuttgart region last sold an S-Class in autumn 2023 and that another dealer has a demo EQS with 5,000 km on the clock… for around 82,000 euros, whereas new it costs more than 130,000 euros as configured. A burden for the dealership.
And looking to the future? The Mercedes S-Class is expected to be renewed in 2025, with a facelift and new technology. These updates always lead to a sales boost, but it remains to be seen whether this will be enough to resume a second production shift. The EQS has already been renewed, but the problem there is more of a concept, of electric luxury cars… where it is difficult to do business. In fact, sales of the Audi Q8 e-tron have stopped and there is talk that the Brussels plant where it is manufactured could close.
