Mercedes readies 2030 strategy update with China at its core

By Amir Orusov

Oct 28 (Reuters) - Mercedes-Benz is preparing a broader strategy update for 2030 and beyond, with China to remain a central pillar of its long-term plans, CEO Ola Källenius said, even as the carmaker works to reduce its reliance on the market.

The German premium automaker will provide a more comprehensive strategic update next year, including a detailed review of its China business, after a much steeper-than-expected downturn in the world's biggest auto market weighed on earnings.

"If you're a global car company like Mercedes, there is not a play where you put China aside," Källenius told an analyst call on Wednesday, describing China as an indispensable market and innovation hub.

At the same time, Mercedes is reassessing its operating model in the country after weakness in both the overall market and the luxury segment exceeded its expectations.

Finance chief Harald Wilhelm said Mercedes aimed to become less dependent on profit pools from China and was localising its supply chain, moving future China-built vehicles close to full local sourcing to cut costs and improve competitiveness.

Beyond China, Mercedes is betting on growth in the US, where Källenius said the company planned further investments and saw potential to increase annual sales from more than 300,000 vehicles towards 400,000.

Earlier, rival Audi announced a $4 billion investment in a new US assembly plant that will create around 4,500 jobs, as German carmakers deepen their commitment to the American market.

In Germany, Mercedes is stepping up efforts to improve competitiveness. It will relaunch a voluntary severance programme for indirect staff from December, after a previous round attracted strong employee participation.

The company booked about €1.8 billion in provisions related to the previous programme in 2025. It said the new programme would follow the same principles, with most of the earnings impact expected to be recognized in 2027.

Further investment in Germany will depend on improving productivity and lowering costs, Källenius said.

He said labour costs in the US, despite it being a high-wage country, were at roughly 80% of German levels, and Germany should be able to narrow that gap. He also pointed to lower-cost manufacturing opportunities in Eastern Europe, where Mercedes already has a significant presence in Hungary, Romania and Poland.

(Reporting by Amir Orusov; additional reporting by Ilona Wissenbach; editing by Milla Nissi-Prussak)