Mercedes-Benz has announced plans to reduce production of its flagship Mercedes S-Class at its Factory 56 plant in Sindelfingen, Germany. This decision comes in response to a significant decline in demand for the luxury sedan, particularly in key markets such as China, the United States, and Europe.

Beginning in the fourth quarter, Factory 56 will shift to a single-shift operation, impacting approximately 1,500 employees. While the company plans to redeploy some workers to other production areas, temporary staff may be let go.

The drop in Mercedes S-Class sales is attributed to several factors, including increased competition from Chinese electric vehicles, a shift in consumer preferences towards smaller, more affordable models, and the high cost of electric vehicles like the EQS.

Mercedes’ CEO, Ola Källenius, has acknowledged the challenges facing the company, especially in China. The price war in the Chinese market and the focus on high-end models have contributed to the decline in sales.

The production cut’s impact extends to suppliers, with one major component supplier describing the situation as a “catastrophe” due to the reduced vehicle output.

Although there is no certainty regarding when Factory 56 might return to a two-shift operation, a planned facelift and the introduction of new technology in 2025 could potentially boost demand for the S-Class.

The decline in demand for luxury electric vehicles is also affecting other automakers, with Audi considering closing its Brussels plant due to slow sales of the Q8 E-tron.