In the fierce market competition, since 2025, a number of luxury car brands have released layoff plans, Audi has become the latest brand to join the camp. Audi has agreed with labor unions to cut around 7,500 jobs in Germany by 2029 in a bid to reduce costs and improve competitiveness. Audi follows Aston Martin, Mercedes-Benz and Porsche, which have announced staff changes to cope with declining performance.

 

Cost reduction and efficiency gains, layoffs continue

 

"The slowdown in global economic growth, policy uncertainty, and increased competitive pressures pose significant challenges for the company. In order to ensure that German plants are future-proof and competitive, the Audi Management Board and the works Council have reached a joint agreement on the future. We will increase productivity, speed and flexibility at our plants in Ingolstadt and Neckarsum, Germany." Audi said in an official statement that management and the works council decided to reduce 7,500 jobs in "indirect areas" by 2029.

 

The so-called "indirect areas", that is, non-production areas, such as administration, management, finance, sales, research and development departments. "Companies are looking at where digitization can help reduce workload in indirect areas." Audi said it would also adjust its wage structure to reduce labor costs. "Audi has to become faster, more flexible and more efficient, which means we have to make the necessary personnel adjustments." Audi chief executive officer Denis Gautner said. Through a series of initiatives, Audi plans to cut costs by more than 1 billion euros per year. As compensation, Audi has extended the employment guarantee agreement from 2029 to the end of 2033.

 

Audi is not the only luxury brand to announce layoffs this year. "To ensure the company's competitiveness, we are taking steps to make the company faster, leaner and stronger." At the earnings conference held on February 20 this year, Kang Linsong, CEO of Mercedes-Benz Group, said.

 

Mercedes-benz has proposed to reduce production costs by 10 percent by 2027, working closely with suppliers to address material costs, and fixed cost reduction initiatives will also continue through 2027. To this end, the company intends to adjust the global capacity layout, close inefficient plants, improve the utilization of existing plants and optimize the supply chain. In the next three years, Mercedes-Benz Cars plans to maintain a global production capacity of 2 million to 2.5 million vehicles. Among them, the home base of Germany will cut 100,000 units of production capacity. "We will not close our German plants, but we will control the capacity of our German plants, which each have a capacity of about 300,000 vehicles." At the same time, the number of employees will be reduced accordingly." "The company said. In addition to Germany, Mercedes-Benz is also taking similar measures in other countries and regions, such as China.

 

It was followed by Aston Martin, which announced plans to cut about 170 jobs, or 5 percent of its workforce. Aston Martin chief executive Adrian Hallmark said the move was expected to save the company about £25 million a year.

 

Porsche then announced on March 12 that as part of its efficiency drive, the company will reduce about 1,900 jobs by 2029, mainly through natural mobility, reduced recruitment, voluntary retirement, special redundancies and other means. At the same time, Porsche will also cut a further 2,000 employees by not renewing fixed contracts when they expire. That would bring the total number of job cuts to about 3,900. In addition, Porsche management and labor unions are also in talks on "additional structural packages" in the second half of the year to further improve operational efficiency in the medium and long term.

 

Performance is down and transformation is weak

 

As for why luxury brands are shedding jobs, the earnings report seems to speak for itself. Porsche, for example, reported revenues of 40.083 billion euros in 2024, down 1.1% year-on-year. Net profit was 3.595 billion euros, down 30.3%; Return on sales was 14.1 percent, down from 18 percent in 2023. Porsche cited "structural changes in demand in China, slower-than-expected growth in electric vehicles, and partial disruptions in the supplier network." Especially in the Chinese market, Porsche delivered 56,900 units in 2024, down 28% from the previous year.

 

Audi's situation is not good either. In 2024, the total revenue of the Audi Group was 64.532 billion euros, a decrease of 7.6%. Operating profit of €3.9 billion, down 37.8%; Operating sales margin was 6%, down 3% year over year. In addition, due to weak electric transformation and poor sales of the Q8 e-tron, Audi closed its electric vehicle factory in Brussels, Belgium, at the end of February this year.

 

Aston Martin's job cuts are in response to soaring losses. In the context of the accelerating transformation of the global automotive industry to electrification, Aston Martin has not been able to keep up with the pace of industry development. In 2024, Aston Martin's global sales fell 8.9% year-on-year to 6,030 units, missing its annual sales target. Among them, in the Chinese market, Aston Martin's sales plunged 49% year-on-year. This also led to Aston Martin once again delivered a regrettable financial results, a full-year loss of 289 million pounds, compared with a loss of 239.8 million pounds in 2023; Corporate debt surged 43 per cent year-on-year to £1.16bn.

 

"2024 will be a very challenging year for the European automotive industry as a whole, we expected this, but the situation continues to deteriorate. At the same time, we are experiencing a significant drop in demand in the Chinese luxury car market. In addition, costs are increasing in many areas, especially in the supply chain." Oberumu, chairman of the board of directors of the Volkswagen Group and also chairman of the board of directors of Porsche, said.

 

This is also a common problem faced by European car companies, weak demand for electric vehicles, high transformation costs, declining market share in China, fierce competition from Chinese car companies, and new tariffs implemented by US President Donald Trump, all make these luxury brands feel "pressure".

 

Brand premium ability continues to weaken

 

For Porsche and BBA (BMW, Mercedes, Audi), the decline is largely to blame for its poor performance in the Chinese market. In 2024, Mercedes-Benz Group revenue was 145.6 billion euros, down 4.5% year-on-year; Net income was €10.4bn, down 28 per cent from a year earlier. In terms of sales volume, the group's global sales volume in 2024 was 2.389 million vehicles, down 4% year-on-year, of which 714,000 vehicles were delivered in the Chinese market, down 7% year-on-year. For 2025, the Mercedes-Benz Group expects its EBIT and free cash flow to be significantly lower than in 2024.

 

In fact, with the advance of the wave of electrification and intelligence, in the Chinese market, which is crucial for German brands, local brands are cutting into the luxury car segment, which has brought no small pressure to traditional luxury car brands. As Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said, the intelligent and electric transformation has brought opportunities for Chinese auto brands to enter the high-end market. In 2024, most of China's high-end new energy vehicle brands achieved the best performance in brand history, which is in sharp contrast to the decline of Audi, Mercedes-Benz, Porsche, BMW and other brands in the Chinese market.

 

At present, China's new energy vehicle market has entered the "second half" competition around intelligent competition. Many industry insiders have pointed out that for the Chinese car market, 2025 will be the first year of intelligent driving. Under the impact of automobile intelligence, the entry of technology brands such as Huawei and Xiaomi has greatly impacted the premium ability of the above traditional luxury car brands. Young consumers, in particular, have relatively low brand loyalty to BBA and prefer smart experiences when buying cars. Just like the first owners of the Xiaomi SU7 Ultra, which was hot and sold for 529,900 yuan not long ago, the age group is mainly 30 to 35 years old, and the users of traditional luxury car brands (BBA, Porsche, Ferrari, etc.) account for 80% to 90%.

 

In the Chinese market, where intelligence is in full swing, the above luxury car brands are accelerating their integration into the local ecology and making up for their shortcomings. Following Mercedes Benz and Audi, BMW recently announced a strategic cooperation with Huawei terminal.

 

Oil and electricity, bet on the future

 

In the face of serious challenges, traditional luxury car brands are trying to rebet on the future by aggressively cutting costs, "walking on two legs" with internal combustion engines and electric vehicles, and investing heavily.

 

Audi, for example, announced layoffs at the same time, Audi pledged to invest about 8 billion euros in Germany by 2029, for technological innovation and production line upgrades, to make the German factory into a "transition to electric vehicles, strong and flexible factory." The plant in Ingolstadt, Germany, is scheduled to add an entry-level electric model. The upcoming new generation of the Audi Q3 fuel car will also be produced simultaneously at the Ingolstadt plant as well as at the Hungarian plant. The Neckarsum plant in Germany will be expanded to become Audi's artificial intelligence and digitalization center.

 

In addition, Audi had planned to launch its last fuel car in 2026 and stop selling fuel cars outside China in 2032. Now, as demand for electric vehicles has not grown as expected, Audi has adjusted its timetable for the withdrawal of fuel vehicles. According to the new plan, Audi will continue to produce some fuel models after 2030, and optimize the electronic architecture of traditional fuel vehicles to improve market competitiveness.

 

Considering that electric vehicles are difficult to make profits in the short term, Porsche said that the company still regards electrification as the future core technology, but will extend the electric transition period and continue to provide internal combustion engines, pure electricity, and hybrid "three-pronged" product portfolio. "We're going back to the internal combustion engine and hybrids, and we're going to focus on core models like the 911 first." Obomu pointed out that the next step will be to further strengthen the Porsche brand core by adding internal combustion engine models.

 

The Mercedes-Benz Group will also launch a new round of product offensives around the world, hoping that by 2027, electric vehicles will account for more than 30% of its global sales. The group also said that related research and development investment is expected to peak in 2025 due to the large-scale product launch program, before slowing from 2026 onwards. Among them, for the Chinese market, the group pledged to continue to increase investment. From 2025 to 2027, it will launch several exclusive products in the Chinese market, covering all market segments and driving forms.

 

As for Aston Martin, in response to the loss of current results, Hallmark said that in the future, the strategic focus of the company will shift to "improve operational execution and achieve financial sustainability," and will avoid "unnecessary costs and inefficient operations caused by delays in development cycles or rushed work." Aston Martin, meanwhile, has again delayed the launch of its first all-electric model and is now focusing on hybrid and plug-in technology, with the Valhalla, its first mid-engine plug-in sports car, scheduled to go on sale later this year.

 

Originally published by China Automotive News, March 31, 2025