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Mercedes-Benz Could Shut Down a German Factory—And Hungary May Be the Winner

Mercedes-Benz is reportedly putting increasing pressure on its German production operations as the automaker looks for ways to reduce costs and improve factory efficiency. According to a report from German business weekly WirtschaftsWoche, company management has allegedly warned employee representatives that a German factory could eventually become unnecessary if labor costs cannot be significantly reduced.

The reported warning comes amid increasingly difficult negotiations between Mercedes-Benz management and Germany’s powerful works councils. At the center of the dispute are labor costs, working hours, employee benefits and the competitiveness of Mercedes’ German manufacturing operations.

The stakes are particularly high because Mercedes-Benz has substantial production capacity elsewhere in Europe, including its factory in Kecskemét, Hungary, where production costs are considerably lower than in Germany.

Mercedes-Benz Reportedly Threatens New Eastern European Factory

According to WirtschaftsWoche, citing several sources within Mercedes-Benz, a member of the company’s management board allegedly told workers’ representatives that the company could build a new factory in Eastern Europe if German labor costs are not reduced substantially.

Under that scenario, one of Mercedes-Benz’s existing German production facilities could eventually become unnecessary.

There has been no official decision to close a German factory, and it remains unclear which location could potentially be affected. Neither Mercedes-Benz management nor its supervisory board has reportedly made a final decision.

Mercedes-Benz has also declined to comment on the specific allegations, saying that it generally does not comment on ongoing negotiations with employee representatives.

Nevertheless, the reported warning highlights a broader issue facing Germany’s automotive industry: whether manufacturing vehicles in the country remains economically competitive compared with lower-cost production locations elsewhere in Europe.

German Mercedes Workers Cost More Than Three Times as Much Per Hour

One of the most striking elements of the dispute is the difference in hourly labor costs between Mercedes-Benz’s Hungarian and German operations.

Mercedes-Benz’s Kecskemét plant reportedly has an hourly wage of around €15.60, compared with approximately €49.50 for workers in Germany, according to the figures cited in the source material.

That does not mean the total cost of manufacturing a vehicle is simply 3.2 times higher in Germany. Factory economics also depend on productivity, automation, energy prices, logistics, infrastructure, taxes, supply chains and the complexity of the vehicles being produced.

Mercedes-Benz itself has reportedly said that so-called factory costs in Hungary are around 70 percent lower than in Germany.

Those factory costs include more than employee wages. They can encompass labor, energy, infrastructure, logistics and maintenance, making the difference particularly important when an automaker is deciding where to allocate future production investments.

Kecskemét Could Become Increasingly Important to Mercedes-Benz

Mercedes-Benz already operates one of its most important European production facilities in Kecskemét, Hungary.

The plant has recently undergone a major expansion that reportedly doubled its potential production capacity to approximately 400,000 vehicles annually. More than 5,000 employees work at the facility.

The Kecskemét factory currently produces models including the Mercedes-Benz GLB and the electric C-Class. A smaller version of the G-Class is also expected to join the production lineup.

The expansion gives Mercedes-Benz an important alternative to its higher-cost German manufacturing sites. If the company decides to increase production in lower-cost European locations, Kecskemét would be an obvious candidate to play a larger role.

That does not necessarily mean Mercedes-Benz intends to abandon Germany. The company’s German factories remain strategically important for vehicle production, engineering, technology and the broader Mercedes-Benz industrial network.

However, the cost difference makes future investment decisions increasingly difficult.

Mercedes-Benz Wants Employees to Work Five More Hours

The reported conflict is not limited to wages.

One of management’s most controversial proposals reportedly involves increasing working hours by five hours per week without increasing monthly salaries.

In practical terms, employees would work longer for the same basic pay. From the company’s perspective, the proposal would reduce the effective labor cost per hour while increasing available production capacity.

For employees and works councils, however, the proposal represents a significant change to working conditions.

The discussions reportedly also include a review of additional compensation and benefits.

Christmas bonuses, severance-related payments and other special benefits could potentially be reduced or changed. One special payment has already reportedly been postponed, while employee profit-sharing payments could also be reduced or temporarily suspended.

Works councils have rejected the proposals, with sources reportedly describing the company’s approach as excessive pressure and even “blackmail.”

Mercedes-Benz Says German Factories Have Too Much Capacity

The cost dispute comes as Mercedes-Benz evaluates the future capacity of its German manufacturing network.

In June, company management reportedly sent a letter to employees warning that the production capacity of German factories was “significantly above demand.”

Management also reportedly pointed to high sickness absence rates and fewer annual working days compared with some international locations.

According to the company’s assessment, Mercedes-Benz employs more people per vehicle produced in Germany than other manufacturers.

The conclusion is straightforward from a business perspective: German plants need to become more productive and less expensive if they are to remain competitive for future investments.

Management has therefore reportedly argued that labor costs need to be reduced throughout the organization, including development, sales, administration and manufacturing.

The most direct message is that employees should work more for the same salary.

Why Germany Is Becoming More Difficult for Automakers

The Mercedes-Benz dispute is part of a much larger problem affecting Germany’s automotive industry.

For decades, Germany’s car industry benefited from a combination of highly skilled workers, strong engineering capabilities, premium vehicle production and a sophisticated industrial supply chain.

But the economics of global vehicle manufacturing have changed dramatically.

Automakers are now dealing with higher energy costs, intense competition from Chinese manufacturers, weaker demand in some markets and enormous investment requirements for electric vehicles, batteries, software and new vehicle platforms.

At the same time, manufacturers are under pressure to keep prices competitive.

That creates a difficult equation for German automakers. Producing vehicles in Germany offers major advantages, including access to engineering expertise, established suppliers and a highly skilled workforce. But those advantages come with significantly higher labor and operating costs.

Lower-cost production locations in Central and Eastern Europe can therefore become increasingly attractive when manufacturers plan new capacity.

Volkswagen Has Already Shown How Serious the Problem Is

Mercedes-Benz’s reported internal pressure stands in contrast to the situation at Volkswagen, where factory closures, job reductions and extensive cost-cutting measures have already become a major part of the company’s restructuring discussions.

Mercedes-Benz has generally been viewed as being in a stronger financial and operational position than Volkswagen.

That makes the reported developments particularly significant.

If even a premium manufacturer such as Mercedes-Benz is considering whether its German factories are cost-competitive enough for future investment, the pressure on Germany’s traditional automotive manufacturing model is becoming increasingly difficult to ignore.

The question is no longer simply how many cars German factories can build.

It is how cheaply and flexibly they can build them compared with plants elsewhere in Europe and around the world.

Will Mercedes-Benz Move More Production to Hungary?

At this stage, there is no confirmed decision to close a Mercedes-Benz factory in Germany or build another plant in Eastern Europe.

However, the company’s existing investment in Hungary demonstrates that Mercedes-Benz already has a substantial lower-cost manufacturing alternative within its European production network.

The Kecskemét plant’s expanded capacity could give the automaker considerable flexibility when deciding where future models should be manufactured.

If German labor costs remain significantly higher and domestic factories continue to operate below their potential capacity, the economic argument for directing additional production toward Hungary or other lower-cost locations could become stronger.

For Mercedes-Benz employees in Germany, that creates an uncomfortable situation.

The future of their jobs may increasingly depend not only on the success of individual vehicle models, but also on whether German factories can demonstrate that their higher costs are justified by greater productivity, quality, flexibility and strategic value.

The Future of German Car Manufacturing Is at Stake

The Mercedes-Benz dispute illustrates a fundamental challenge facing the German automotive industry.

High wages, strong employee protections and extensive worker participation have historically been central components of Germany’s industrial model. They helped create a highly skilled manufacturing workforce and supported the country’s position as one of the world’s most important automotive production centers.

But global competition is forcing manufacturers to reconsider the economics of that model.

Chinese automakers are expanding rapidly, electric vehicles require enormous investments and European manufacturers are searching for ways to lower costs without sacrificing quality.

Mercedes-Benz now appears to be facing the same fundamental question as many of its German competitors:

How much more can it afford to pay to build a vehicle in Germany?

If the answer becomes “too much,” future investment could increasingly move toward lower-cost European production sites.

For now, no German Mercedes-Benz factory has been officially selected for closure. But the reported threat is a clear warning that Germany’s position at the heart of European car manufacturing can no longer be taken for granted.

The next round of negotiations between Mercedes-Benz management and its works councils could therefore have implications far beyond working hours and employee benefits. It could help determine where the next generation of Mercedes-Benz vehicles is built—and whether Germany remains at the center of the company’s manufacturing strategy.

Source: WirtschaftsWoche

News

Mercedes-Benz’s Billion-Euro Bet on Hungary Is About More Than Building Cars

Mercedes-Benz isn’t just expanding a factory in Hungary—it’s reshaping how the company plans to build its next generation of vehicles. The automaker has officially opened a massive new production complex at its Kecskemét plant, a €1 billion investment that signals the future of Mercedes manufacturing: more electric vehicles, more digitalization, and far more flexibility.

If the three-pointed star wants to remain competitive in an automotive industry that’s rapidly shifting toward electrification while demand remains unpredictable, Kecskemét is becoming one of its most important chess pieces.

The numbers alone are impressive. The Hungarian facility has more than doubled in size, growing from roughly 500 acres to nearly 1,100 acres (200 to 440 hectares), making it the largest automotive manufacturing site in Hungary and one of Mercedes-Benz’s biggest production hubs worldwide.

But this isn’t simply an exercise in building bigger factories. It’s about building smarter ones.

A Factory Designed for an Electric Future

The centerpiece of the expansion is the start of production for the all-electric C-Class, marking the first time Kecskemét has produced a battery-electric model in Mercedes’ core lineup. It’s a milestone that reflects the company’s broader strategy of steadily shifting its manufacturing footprint toward EVs without abandoning combustion-powered models overnight.

Mercedes has taken a pragmatic approach. Existing production lines will continue assembling internal-combustion and battery-electric vehicles side by side, allowing the company to respond quickly as consumer demand fluctuates. Meanwhile, an entirely new assembly hall has been purpose-built exclusively for electric vehicles, providing higher efficiency as EV volumes continue to grow.

That flexibility may prove invaluable. Rather than locking itself into a single technology, Mercedes can adjust production mixes as global markets evolve—a significant advantage at a time when EV adoption varies dramatically from country to country.

Manufacturing Meets Silicon Valley

Perhaps the most fascinating aspect of the new facility isn’t what happens on the production line, but what happens before a single car is built.

Mercedes has created its first complete digital twin of an assembly hall using NVIDIA Omniverse technology. Every workstation, production process, and assembly sequence exists in a virtual environment before becoming reality.

That means engineers can simulate manufacturing changes, test new equipment, validate workflows, and identify bottlenecks without interrupting production. Instead of discovering problems after installation, Mercedes can solve many of them inside a computer simulation.

The digital ecosystem is powered by the company’s MO360 production platform, which links manufacturing, quality control, and supply chain data across Mercedes-Benz plants worldwide. Combined with AI-powered quality inspection systems capable of detecting defects in real time, the result is a factory where software increasingly becomes as important as robotics.

It’s a reminder that modern automotive manufacturing is becoming as much a technology business as it is an industrial one.

Building More Than the C-Class

The expanded facility will play a far larger role than producing a single electric sedan.

Battery packs and body components for locally built vehicles are manufactured on-site, supporting Mercedes’ “local-for-local” strategy that shortens supply chains and reduces exposure to global logistics disruptions.

Future production responsibilities are equally significant. Alongside the electric GLB and electric C-Class, Kecskemét will become the exclusive production home for the upcoming compact version of the legendary G-Class—a notable vote of confidence for the Hungarian operation.

The factory will also work in tandem with Mercedes plants in Germany through a highly integrated production network. Models such as the electric GLC can eventually be built in either Bremen or Kecskemét depending on market demand, giving Mercedes the ability to shift production where capacity is available.

In today’s unpredictable automotive market, that kind of manufacturing agility may be just as valuable as horsepower or battery range.

Sustainability Without the Buzzwords

Automakers often describe new factories as “green,” but Mercedes has backed up that claim with tangible investments.

A new 27.4-megawatt solar park, combined with rooftop photovoltaic installations, delivers more than 42 megawatts of renewable generating capacity—enough to supply roughly a quarter of the plant’s annual electricity needs.

The new paint shop is equally notable, reducing energy consumption by approximately 20 percent while cutting carbon emissions by around 80 percent compared with the previous facility. Additional upgrades targeting water conservation and waste reduction further improve the plant’s environmental footprint.

While no automobile factory can truly be considered emission-free, Kecskemét demonstrates how manufacturers can significantly reduce the environmental impact of vehicle production.

Investing in People as Well as Production

Mercedes’ investment extends beyond steel, robots, and solar panels.

The site already employs more than 5,000 people, making it the largest private employer in the region. The company continues investing in workforce development through the Mercedes-Benz Academy Kecskemét, partnerships with Neumann János University, its own school, and childcare facilities designed to improve work-life balance.

In an era when skilled manufacturing labor is increasingly difficult to recruit and retain, developing talent has become almost as critical as developing new vehicles.

The expansion of Kecskemét isn’t simply another factory opening. It’s a glimpse into how Mercedes-Benz intends to compete over the next decade.

Instead of separating electric and combustion vehicles into entirely different production systems, the company is building factories capable of handling both. Instead of relying on rigid manufacturing, it’s embracing software-defined production. And instead of depending on long international supply chains, it’s bringing more critical components closer to where vehicles are assembled.

As Mercedes prepares what it calls the largest product offensive in its history, Kecskemét has evolved from a regional manufacturing plant into one of the company’s strategic pillars.

For customers, the factory itself may never be visible. But the technologies, efficiencies, and flexibility developed here will quietly shape nearly every new Mercedes that rolls onto the road in the years ahead.

Source: Mercedes-Benz

News

BMW’s Art Car Legacy Meets Its Electric Future in Hungary

BMW knows how to put on a show. Fresh off the 50th-anniversary global tour of its iconic Art Car Collection—which has been globe-trotting since March—the automaker’s latest stop landed in Hungary, home of its brand-new iX3 electric crossover. And BMW didn’t waste the moment. Under one roof at Budapest’s Millenáris Park, it brought together two machines separated by nearly six decades yet connected by a single idea: design that moves both the eyes and the wheels.

The star attraction? The very first BMW Art Car, making its debut appearance in Hungary. The 1975 BMW 3.0 CSL—better known as the #93 Le Mans racer—was the brainchild of French racing driver Hervé Poulain, who dreamed up the daring concept of putting real art on real race cars. American sculptor Alexander Calder answered that call, delivering a riot of color across the CSL’s widebody flanks. Although the car didn’t finish the Le Mans endurance race, it kickstarted a tradition that now spans 19 officially recognized BMW Art Cars, the most recent being Julie Mehretu’s M Hybrid V8.

And yet, even parked beside a literal masterpiece, the modern metal refused to fade into the background.

BMW used the Budapest stop as a coming-out party for its all-new iX3, the first production model spun from the company’s Neue Klasse electric platform built at its new Debrecen facility. Several iX3s appeared at the event, all wearing M Sport package trim and rolling on flashy 22-inch wheels. Ocean Wave Blue was the dominant hue of the day, though a single Space Silver example quietly flexed its metallic cool.

The iX3 has only just entered series production, with Europe receiving the first deliveries next spring. The launch model, the iX3 50 xDrive, pairs dual motors with BMW’s largest battery so far—a 108.7-kWh pack. More affordable “40” variants will soon follow in both RWD and AWD configurations, albeit with a smaller battery to keep costs in check.

BMW isn’t stopping there. The company is preparing a modern homage to the classic 1800 TI—the very car displayed alongside the Art Car at the event. The upcoming i3 sedan, arriving next year, will become the first Neue Klasse three-box model of this era. And for the first time in the NK lineage, BMW will introduce a crossover-coupe: the iX4, recently spied testing and expected to break cover later next year.

And what about the next Art Car? It’s coming—BMW all but guarantees it. Logic says a Neue Klasse sedan or coupe will be the canvas of choice. But with the M Hybrid V8 just officially joining the Art Car family last year, BMW seems in no rush. Good art takes time, after all.

For now, the spectacle of Calder’s original CSL beside BMW’s latest electric ambitions offers a fitting juxtaposition: a vivid reminder that while technology evolves, the brand’s love affair with creativity never really changes.

Source: BMW