Mercedes-Benz’s East London plant needs to move beyond C-Class

Mercedes-Benz SA’s factory in East London is world-class, but with dwindling global demand for business-class sedans, the 5th-gen C-Class could be the final version of the model it produces. If it hopes to prevail, the plant must build another product…

Mercedes-Benz might be headquartered in Stuttgart, but as a truly global luxury car brand, it has production facilities everywhere, including – for the past 62 years – East London in the Eastern Cape.

In total, 56 000 people across 21 facilities build the powertrains and cars that carry Mercedes-Benz’s iconic Three-pointed Star. However, of those 21 factories – dotted around the globe – only 7 are assembly factories (where Mercedes-Benz passenger cars are built). And, of those 7 facilities, 4 are outside of Germany – but only 1 has more than half a century of proven build quality.

As Mercedes-Benz introduced smaller cars and SUV models in the 1990s, it needed new vehicle assembly plants. Tuscaloosa, in Alabama, became the American hub for SUVs, while Hungary was another new production node (for Merces-Benz’s smaller cars). And, like any European luxury car company that wanted to trade strongly in Asia, Mercedes-Benz opened a plant in China.

However, the Mercedes-Benz car factory outside of Germany that pre-dates the American, Hungarian, and Chinese plants is in East London. Mercedes-Benz’s facility on the Buffalo River has been operational since 1962 and, for many years, it was the brand’s pioneering quality-control facility outside of Germany.

Building the best in East London

These were built in East London. The W126 was arguably the greatest S-Class ever.

Even among technology-obsessed German car companies, Mercedes-Benz is extreme. It spends more on R&D than any other German car company – it leverages its location in Stuttgart to get the best from local universities’ PhD students in mechanical, electronic, and design engineering. That’s why the East London factory has always been a global outlier and a source of pride for South Africans.

For decades, the idea that South African workers could build world-class Mercedes-Benz cars was remarkable. Especially so because this was when Mercedes-Benz models were known for being the best-built cars in the world – with some models ranking as the best-built cars of all time.

The S-Class has always been a technological marvel. And in the history of all things S-Class, the W126 stands as a model range of record – perhaps the best-built luxury car of all time.

Mercedes-Benz workers in East London were entrusted with building W126-series S-Class throughout the 1980s and early 1990s. There is no greater testament to the East London factory’s legacy than its history as a W126 builder.

Find a new/used Mercedes-Benz C-Class listed for sale on Cars.co.za

Going beyond the C-Class

C-Class has served East London well. But its global growth is reversing.

The current production configuration in East London is for the W206-generation Mercedes-Benz C-Class. Once a crucial car in the Mercedes-Benz model range, the C-Class has suffered the same fate as its rivals from Audi (A4), BMW (3 Series) and others – a collapse of demand for compact luxury sedans.

It’s not the fault of anyone at Mercedes-Benz product planning, marketing, or even the workers in East London. Since the mid-90s, every iteration of the C-Class has been built in Mzansi (for many markets), but the reality is that the C-Class sedan is being built to sell into a dramatically narrowing market.

The world’s 2 most entrenched luxury sedan markets – America and China – have been transitioning to crossovers for years. In Europe, Tesla’s Model 3 has supported the demand curve for luxury sedans, but the trend is clear – crossovers are the future. This is why Mercedes-Benz invests so much in its GLC executive SUV, which is based on the same platform as the W206-generation C-Class.

What does all this mean for a South African car factory that has built some of the best German luxury cars in history? A future that is potentially as stormy as the low-pressure systems that often make the Buffalo River waterway and ocean passage extraordinarily treacherous for marine transport.

At least Mercedes-Benz has money for change

The Mercedes East London factory is future-proofed for energy.

Mercedes-Benz makes good money; it had a net profit of R280bn last year – more than Eskom’s entire revenue for the same period. The global business is strong, but for the East London factory, all that matters is the status of the C-Class and its future business case. And that’s not an easy case to make.

The 2 leading German luxury car companies – BMW and Mercedes-Benz – are symbiotic; the best way to understand one is to benchmark it against the other.

For decades, BMW and Mercedes-Benz’s South African car factories built reasonably similar cars: sedans and limousines. However, a few years ago, BMW transitioned its South African vehicle production from 3 Series to X3, allowing it access to the trending global demand curve for crossovers and SUVs.

There’s little question that strategists at the Mercedes-Benz East London factory would want to do the same – build the GLC in the Eastern Cape instead of the C-Class – but making that happen isn’t just about vision. It’s about reality. Most global GLC production is accounted for by Bremen and Beijing, making it difficult for East London to present a case for its share of GLC production.

Mercedes-Benz’s East London factory is in a challenging position. The sedan market is sunsetting while crossovers and SUVs continue to rise. Moreover, some markets are being prioritised for electrification, while South African production skills and supply chains remain inadequate for producing EVs.

Think beyond building Mercedes-Benz models

W126 proved the East London factory can do anything automotive – at the highest standard.

You don’t need to be a business analyst to interpret the risks for Mercedes-Benz’s East London factory. The recent risk of 700 job losses for this proud Mercedes-Benz factory, might just be the beginning.

But are there solutions? If you’re a proudly South African motoring enthusiast or Sentametalist, there is an entrenched desire for the Mercedes-Benz East London factory to survive – and thrive.

Geely is the biggest shareholder in Mercedes-Benz. Could the Chinese giant build one of its models in Mzansi? Well, before the East London factory built Ballade and Civic models for Honda (in the ’80s and ’90s), and Colts and Tritons for Mitsubishi (from the ’90s to 2010s), nobody would have predicted it…

Two things could secure the future of the Mercedes-Benz plant in East London and have workers tooling up for 4 shifts again. The first is a mild global trend that is making a big difference – hybrids.

Despite all the R&D invested in (and nearly hysteric marketing of) EVs, they’re underperforming in many markets for luxury car brands. And Mercedes-Benz isn’t an exception. The paradox is that mild hybrids and PHEVs are overperforming, with EV-curious buyers opting for a hybridised experience instead.

Getting government policy and a local supply chain aligned to produce hybrid vehicles in East London will be much easier than paving the way to build 80-100kWh EVs. The East London factory already builds C-Class hybrids, so making a case for building PHEVs would be much easier than for assembling full EVs.

What if Mercedes-Benz produced bakkies in East London?

For nearly two decades, Mitsubishi bakkies were built by Mercedes-Benz in East London.

What is the 2nd idea for getting that 4th shift back in Mercedes-Benz’s East London plant? Build bakkies. “That’s a crazy and ridiculous idea, X-Class was a total failure,” I hear you say.

Yes, Mercedes-Benz’s Navara twin might have been its only true product failure in decades. Still, bakkies remain a hugely profitable product category, and they’re very easy to build – being low-tech vehicles. Best of all, South Africa has an established bakkie component supply chain.

To reiterate, Mercedes-Benz’s East London factory has a history of building bakkies, having assembled Mitsubishi Colts and Tritons from 1994 to the early 2010s…

The simple fact is that Mercedes-Benz’s East London factory needs to build more vehicles for local and international consumption to avoid losing jobs. Another bakkie assembly partnership is a much lower-cost way of achieving that than hoping for South Africa’s EV supply chain to materialise.

New Mercedes-Benz C-Class specs & prices in South Africa