Mercedes-Benz is preparing to begin formal negotiations with union leaders on further cost-reduction and competitiveness measures as the German carmaker increases its use of artificial intelligence to improve productivity.

The discussions were confirmed by human resources chief Britta Seeger and will run alongside existing labour agreements, known internally as ZuSi (Zukunftssicherung, or “future security”), which remain in place until 2034 and exclude compulsory redundancies at the company’s German factories.

According to Bloomberg’s report, the negotiations come as the carmaker faces pressure from US tariffs and a prolonged sales decline in China.

In China, weaker consumer confidence, a property slump, and intensifying competition from domestic electric vehicle manufacturers have weighed on demand for luxury vehicles.

Speaking at Mercedes-Benz headquarters in Stuttgart, Germany, as reported by the publication, Seeger said: “We need to evaluate, have we done everything within Mercedes, within Germany, to be more competitive against our rivals. We need to make sure Germany does everything to be a competitive country.”

So far, Mercedes has cut headcount through natural attrition and voluntary redundancies only.

Mercedes-Benz reported a car making margin of 4.1% in the first quarter, compared with 7.3% a year earlier.

On the use of AI, Seeger said about 60% of Mercedes-Benz employees now use the technology every day, compared with 30% when the company started monitoring usage around 18 months ago.

Mercedes-Benz is aiming for a 70% adoption rate by the end of the year.

Seeger said AI should be seen as a productivity tool that will alter how work is carried out across the company, rather than as a tool focused only on reducing headcount.

Mercedes-Benz joins other German carmakers reviewing costs.

Volkswagen is pursuing further cost-cutting measures in addition to plans to shed approximately 50,000 jobs by the end of the decade.

BMW has said its car making margin could drop to as low as 1% this year, from previous guidance of up to 6%, and announced additional savings beyond those already disclosed.

Mercedes-Benz said it expects a stronger second half of the year, helped by new model launches and solid order intake, with performance improvements expected in the months ahead.