Mercedes-Benz Bets on 2028 Autonomous Driving Rollout While Squeezing German Labor Costs

Mercedes-Benz signs binding Wayve deal for 2028 rollout while Q2 revenue slips to EUR 32.06 billion and China deliveries fall 30%.

Mercedes-Benz has locked in a binding production agreement with British AI startup Wayve, with the "Wayve AI Driver" software set to handle urban and highway assistance functions in future vehicles. The Stuttgart-based automaker is targeting 2028 for the commercial rollout, with integration beginning within the next two years.

The deal, confirmed on Wednesday, underscores how the company is trying to future-proof its product lineup even as its core business comes under mounting strain. Investors have taken a cautious view: the stock has shed 32% since the start of the year and was trading at EUR 41.12.

China Weakness Erodes Profitability

The pressure is most visible in the numbers. Revenue fell to EUR 32.06 billion in the second quarter of 2026, with EBIT coming in at EUR 1.55 billion. Deliveries in China — a market Mercedes has long relied on — dropped 30%. A EUR 704 million impairment on joint ventures in the country added to the pain, and the adjusted return on sales for the passenger car division stood at just 4.0%.

Those figures lay bare how heavily the group's earnings hinge on Chinese demand, and they have sharpened management's urgency to bring cost structures in line with a changed market reality.

A EUR 800 Million Target at Home

Part of that response involves cutting EUR 800 million from German labor costs, according to a WirtschaftsWoche report. Measures under discussion include longer working hours without extra pay, adjustments to Christmas and holiday bonuses, and the elimination of special payments. Mercedes declined to comment on the ongoing talks.

Behind the savings push lies a blunt warning from management. On Tuesday the company said production in Germany is no longer internationally competitive, largely because of high labor costs. Production chief Michael Schiebe had already told employees that without savings, the closure of a German assembly plant and a powertrain facility was on the table — though no specific sites were named.

The political dimension is heating up as well. On September 17, the states of Baden-Württemberg, Bavaria, and Lower Saxony called on the federal government and the European Union to accelerate support for Germany's auto industry and cushion the effects of its far-reaching transformation.

Analyst Caution and a Looming Q3 Report

Sentiment on the analyst side remains muted. On September 16, Berenberg trimmed its price target from EUR 56 to EUR 52 while keeping a "Hold" rating; analyst Romain Gourvil cited a lack of near-term upside momentum. Two days earlier, Bernstein Research had reaffirmed its "Market-Perform" rating with a EUR 56 target, with analyst Harry Martin pointing to persistent challenges in China.

Fresh insight into the company's financial health is due on October 28, when Mercedes-Benz publishes its interim report for the third quarter of 2026.

Balancing Global Bets and Domestic Cuts

While domestic savings are being negotiated, Mercedes is pressing ahead with international initiatives. Alongside the Wayve agreement, CEO Ola Källenius held a video call with Chinese Trade Minister Wang Wentao on Tuesday. According to Chinese officials, Wang welcomed possible additional investment from Mercedes in China and the expansion of innovation partnerships with local firms.

The company had also agreed more than a month ago to sell its Berlin dealerships to Global Auto Holdings, with completion slated for the end of 2026 — another sign of how far-reaching the restructuring at home has become.