Mercedes Says It Costs Too Much To Build Cars In Germany, Two Plants Could Close

Mercedes-Benz may be one of Germany's most famous exports, but apparently, building its cars at home is becoming increasingly difficult to justify. The automaker has warned that one vehicle assembly plant and one powertrain plant in Germany could eventually close if it cannot bring production costs down.

Mercedes production chief Michael Schiebe delivered the warning to workers at the company's Sindelfingen plant, saying German production is currently not competitive by international standards, with high labour costs among the problems facing its domestic operations.

But before anyone starts imagining Mercedes packing up and leaving Germany, there's an important distinction: no plant closure has been decided, and Mercedes hasn't named any factories for closure.

In fact, the automaker says its objective remains keeping all of its German locations. The warning is essentially that doing so will require costs to come down.

Germany Is Simply Expensive For Mercedes

Mercedes' warning makes more sense when you look at what it costs the automaker to manufacture elsewhere. Back in 2025, Mercedes revealed that factor costs at its Kecskemét plant in Hungary were roughly 70% lower than in Germany.

That's a huge difference for a global manufacturer deciding where future cars should be built. And Mercedes has already been adjusting its production strategy accordingly.

Mercedes wants the share of its European production located in lower-cost countries to rise from 15% in 2024 to 30% by 2027. At the same time, the automaker is targeting a 10% reduction in production cost per vehicle from 2027 onwards compared with 2024 levels. Mercedes says it had already achieved a 4% reduction in 2025.

The Kecskemét operation is becoming increasingly important too, with Mercedes expanding the Hungarian plant to support annual production capacity of up to 400,000 vehicles.

Mercedes Previously Said Its German Plants Were Staying

Here's where things get particularly interesting. At its Capital Market Day in February 2025, Mercedes said there were no plans to shut down plants in Germany.

Instead, the company planned to balance production across its German factories while making its wider global manufacturing network cheaper and more efficient.

Fast-forward to September 2026, and closures are now being discussed as a possible outcome if Mercedes and its workers cannot find sufficient cost savings.

So, this doesn't mean Mercedes has decided to close anything. But it does show just how seriously the automaker is treating the competitiveness of its German factories.

The company's works council isn't exactly thrilled about the warning either. It has rejected using plant closures as a threat and says it would oppose any attempt to close German facilities.

This isn't the first sign of pressure on Mercedes' German manufacturing operations either. Carz previously reported that Mercedes had cut S-Class production at its Factory 56 facility in Sindelfingen from two shifts to one amid weaker sales of its flagship sedan.

It's Not Just Mercedes Feeling The Pressure

Mercedes isn't operating in a vacuum. Germany's wider automotive industry is going through a difficult restructuring period, with workers protesting amid concerns over job cuts and possible factory closures.

German automakers are simultaneously dealing with tougher global competition, including increasingly capable Chinese manufacturers, as well as international trade pressures such as US tariffs.

A recent European Central Bank (ECB) analysis also found Germany particularly exposed to China's industrial expansion because the two countries increasingly compete in similar export sectors, including machinery and transport equipment.

In other words, German automakers aren't just competing with each other anymore. Their factories have to make economic sense within increasingly global production networks too.

But Mercedes Isn't Abandoning Germany

There is another side to this story. Just days before Schiebe's warning, Mercedes began series production of the new GLA at its Rastatt plant in Germany.

Mercedes says it has invested in the site and is strengthening Rastatt's role within its global production network. The factory employs around 7,000 people and can produce combustion-powered, hybrid and fully electric vehicles using flexible production infrastructure.

So this isn't a case of Mercedes simply deciding that Germany no longer has a place in its manufacturing future.

That's the difficult calculation facing the automaker now: Mercedes wants to continue building cars in Germany, but it also needs those factories to compete with considerably cheaper production locations elsewhere.

And when one of Germany's most famous automakers is openly discussing the possibility of closing factories at home, it's a pretty clear indication of just how serious that cost problem has become.