- Mercedes says its Hungarian production costs are 70 percent below Germany’s levels.
- Kecskemét plant gains C-Class and G-Class production while German workers face cuts.
- Porsche takes opposite path, betting the Made-in-Germany tagline still matters to buyers.
Mercedes-Benz loves to tell us it invented the automobile in Germany, but Germany is becoming an increasingly expensive place to build one. The automaker is rapidly expanding its Hungarian operations, where it says production costs are 70 percent lower, while asking workers back home to work longer without earning more.
Benz’s Kecskemét, Hungary, factory has doubled annual capacity to 400,000 vehicles, making it Mercedes’ biggest European production site and second only to Beijing globally. The Hungarian operation, which built its first car 14 years ago, currently employs around 5,000 people and is adding another 3,000. But at the same time Mercedes is cutting jobs and capacity in Germany.
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It’s easy to understand the attraction. Mercedes calculates Hungarian production costs are 70 percent cheaper compared to Germany, Handelsblatt reports. Eurostat figures put industrial labor costs at €49.50 ($56.60) per hour in Germany versus just €15.60 ($17.80) in Hungary. Hungarian employees also work significantly more hours annually due to the country having fewer public holidays and their contracts stipulating a 40-hour work week. German auto workers have been putting in 35-hour weeks since the mid 1990s.
Hungary Gets The Good Stuff
And Kecskemét isn’t just getting Mercedes’ bargain-basement models like it was in the early days. The C-Class is now being assembled there alongside the GLB, while the upcoming compact G-Class will be produced exclusively in Hungary. The GLC, Mercedes’ best-selling model line, is planned for the factory, too.
Back in Germany, the mood is rather different. Around 18,000 workers recently protested after Mercedes tightened its cost-cutting plans. Management wants labor costs down, while proposals include reviewing special payments and getting more from employees for the same money.
Mercedes isn’t alone. Volkswagen has also been reducing its dependence on German manufacturing. Passat production has already shifted to Slovakia, while European Golf production is heading to Mexico in 2027.
Porsche Thinks Location Matters
Porsche, however, is proposing an intriguing counterargument. Despite facing its own problems with profits, sales and declining clout in China, it’s considering moving Cayenne production from Slovakia to Leipzig, where the smaller Macan is already made. New boss Michael Leiters believes German manufacturing remains central to what buyers expect from Porsche.
“We must reinvent ‘Made in Germany’ and prove ourselves,” Leiters said in June. “Ultimately, that will determine whether we are successful.”
There’s a sizeable catch. Bringing Cayenne production home depends on German workers accepting lower pay, while Porsche could cut thousands more jobs by 2035.
What’s Good For Hungary Is Good For Germany
Mercedes argues Hungary ultimately strengthens the whole company. Production chief Michael Schiebe told Handelsblatt the expansion “helps us to secure jobs in Germany,” insisting “This isn’t about Hungary versus Germany.”
But with German automakers under pressure from falling profits and increasingly competitive Chinese rivals, the bigger question is becoming harder to ignore. How much is ‘Made in Germany’ actually worth, and who’s prepared to pay for it?
