German automotive giant Daimler has ruled out expanding production in its home country as it prepares for further cost cuts in the face of a sharp fall in global car sales.

Ola Kallenius, chief executive of the group, which owns Mercedes-Benz and is the country’s oldest carmaker, told the Financial Times it would invest in the rapidly growing Chinese market instead, “and perhaps overseas, to further keep this balance of trying to produce where you sell”.

His comments come days after German car parts supplier Continental said that a further 10,000 jobs were at risk worldwide, on top of 20,000 announced last year.

The German car industry is the backbone of Europe’s largest economy and directly employs about 815,000 people in the country, according to the VDA lobby group. A total of 2.2m work in roles related to car manufacturing.

In June, IG Metall, the union that represents most German car workers, said at least 80,000 jobs could be lost in Germany due to the downturn in the global car market caused by the pandemic.

Tens of thousands of job losses had already been announced before the outbreak, as the industry has struggled with the high costs of shifting to electric vehicle development and production.

Unlike rival Volkswagen, which has just 40 per cent of its workforce in Germany, more than half of Daimler’s 300,000 or so staff are based in its home country, where wages are significantly higher than in central and eastern Europe and Asia.

Roughly 130,000 of those jobs are guaranteed until the end of the decade, thanks to a 2017 deal between unions and former chief executive Dieter Zetsche.

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However last year, Germany accounted for less than 15 per cent of Mercedes car sales, while the company sold double that amount — some 700,000 vehicles — in China alone.

Mr Kallenius, who has previously emphasised that Mercedes would seek to locate its factories closer to its biggest markets, conceded that “labour cost on the production side is higher [in Germany]”, and that Daimler would “have to get more out of labour productivity”.

Last year, it announced it would cut more than 10,000 jobs worldwide over the next couple of years, as part of efforts to save at least €1.4bn in personnel costs.

Because of the pandemic, “the restructuring is going to have to go a little bit deeper”, Mr Kallenius said, but he would not say how many more jobs would be lost.

“We will present to the markets when we have more information on where we think the market is going to go next year,” he added.

On Thursday, Daimler announced it had invested €730m in upgrading parts of its Mercedes factory in Sindelfingen, near Stuttgart, which supports approximately 200,000 jobs in the region, and is where its flagship luxury S-Class saloon is made.

Via Financial Times