BUDAPEST: Mercedes-Benz Group AG has kicked off production of its fully-electric GLB compact SUV in Hungary as the threat of further tariffs and competition from China intensifies the fight to cut costs.
The electric version of the model, is available to order for around €59,000 (RM278,067), will be assembled at the carmaker's plant in Kecskemét, after Mercedes' Rastatt plant in Germany produced earlier versions of the GLB.
The move will allow the company to tap a cost base executives have said is less than half compared to Germany.
"The batteries we put in this car come right from the battery facility we have here on site," Mercedes production chief Michael Schiebe said at a press conference, referring to its facility making battery packs.
"This reduces the transport times, the routes. This gives us big, big advantages."
Mercedes is seeking to bolster its business as demand slows in China for high-end vehicles and more tariffs loom.
Over the weekend, US President Donald Trump reignited fears for fresh tariffs blows with a threat of additional levies on products from eight European countries, including Germany, as part of a standoff over Greenland.
Mercedes and German carmaker peers slumped Monday after Trump blindsided Europe with a plan to slap additional duties of 10% on imports from February, rising to 25% in June.
German manufacturers rely on the US as a major source of sales and profits, and import models such as Mercedes' S-Class to the country.
Mercedes declined as much as 6.7% in Frankfurt on Monday, the steepest intraday decline since April.
Additional US tariffs, in place since April, are already cutting into Mercedes' bottom line with returns sliding also because of growing competition in China from local carmakers including BYD Co, Nio Inc and Xiaomi Corp.
The challenges have undermined Chief Executive Officer Ola Källenius' luxury-first strategy, unveiled in 2022, that targeted a carmaking margin of no less than 8% even under adverse conditions.
In its latest third-quarter earnings report, Mercedes' carmaking returns fell to 4.8% amid a bruising price war in China and US tariffs.
Mercedes has also fallen further behind BMW AG in electric-vehicle sales following a series of product missteps, putting pressure on Källenius for fresh sales momentum from new EVs like the GLC, CLA and GLB.
In addition to the GLB, Mercedes plans to shift more model derivatives outside of Germany, including the electric version of the C-Class sedan, currently built at its Bremen plant, to the Hungarian site later this year.
Expansion in Kecskemét will make it Mercedes' second-largest plant worldwide, behind only its facility in Beijing, which it operates with China's BAIC Motor Corp.
