I know you all like talking about manufacturing plant logistics, so why don’t we stick with that for another gear? Mercedes-Benz says it plans to build the upcoming “Baby” G-Wagen at its plant in Kecskemet, Hungary — not in Graz, Austria, where the full-size G is hand-built by Magna Steyr. I’m sure this’ll bum some folks out, but it does make sense. The Hungary plant is set to play a key role as a manufacturing hub for MB as it accelerates a cost-cutting program that is threatening German factory jobs.
The Baby G, which is set to debut sometime next year, is based on the automaker’s compact MMA architecture, which underpins the new CLA and GLB. The decision to go with Hungary for production leaves the company’s Rastatt factory in Germany (which currently builds the CLA) without a new vehicle program. From Automotive News:
The move underscores Mercedes’ broader strategy of shifting production from Germany to lower-cost locations in Eastern Europe. Until now, the automaker had confirmed only the electric C-Class and its derivatives, including AMG performance variants, for Kecskemet.
Following a €1 billion expansion, the Hungarian plant will become Mercedes’ largest manufacturing site in Europe, with annual capacity increasing to between 300,000 and 400,000 vehicles.
Hungary will account for about 30 percent of Mercedes’ European production, up from roughly 15 percent, according to a person familiar with the company’s manufacturing plans.
Germany’s three Mercedes plants — Sindelfingen, Rastatt and Bremen — will retain a combined capacity of roughly 900,000 vehicles, about 100,000 fewer than before. Current output is closer to 200,000 units per plant.
The investment will add about 3,000 jobs, bringing total employment at Kecskemet to about 7,500 people. The factory already builds the combustion-powered A-Class and the electric GLB, while production of the electric C-Class is also planned.
People familiar with the plans said the successor to the A-Class is also expected to be built in Hungary.
There’s also a U.S. component to all of this, because Mercedes wants to bring more production Stateside as President Trump ramps up tariffs on new vehicles imported from Europe.
Mercedes is considering shifting GLC production for North America from Bremen to Vance, Alabama. If that happens, European GLC production is expected to move to Hungary. The GLC is Mercedes’ bestselling vehicle globally.
Together with other initiatives, the production changes are intended to help Mercedes reduce manufacturing costs by 10 percent between 2024 and 2027.
The decision comes as CEO Ola Kallenius pushes a new cost-cutting program in Germany. In a message to employees, Kallenius announced a “Germany productivity offensive,” warning that assigning new products to German factories further weakens the company’s relative cost position.
Mercedes says it plans to introduce something like 40 new models by 2027, but executives — including Kallenius — are under pressure to make sure those launches actually translate into profitability rather than more investments that go nowhere. Some may argue that introducing a smaller G-Wagen dilutes the brand, but the company is clearly willing to bet that whatever is lost in brand prestige will be made up for with a boatload of sales.
