Overview
Tesla Inc. is intensifying workforce reductions in China as part of efforts to reclaim market dominance, with layoffs now affecting multiple departments at its Shanghai facility. The company confronts obstacles amidst a worldwide deceleration in EV demand, fierce competition, and diminishing market share. Nonetheless, despite the staff reductions, Tesla has obtained approval for its driver-assistance system in China.
Tesla Inc.'s workforce reductions are intensifying in China, according to individuals familiar with the situation, as Elon Musk grapples with mounting pressure to regain market share in the world's largest automotive market.
The latest round of layoffs commenced earlier this week, following the mid-April cuts that were part of the electric vehicle manufacturer's commitment to reduce its global workforce by over 10%, said the individuals, who requested anonymity as they are not authorized to publicly disclose the information.
The recent downsizing impacts various departments, including customer service personnel, engineers, production line workers, and the logistics team at Tesla's Shanghai facility, which accounts for more than half of the company's global production, according to the sources. Last month's layoffs more directly affected sales representatives, they added.
The exact number of individuals affected and the potential implications for Tesla's operations in China remain unclear. Requests for comments from the company's representatives in China went unanswered.
Tesla's largest-ever layoffs come amid a global slump in demand for electric vehicles. However, the impact has been particularly pronounced in China, where fierce competition from rivals such as BYD Co. and subdued consumer confidence are denting sales. Shipments from its Shanghai factory declined by 18% in April, despite a 33% growth in the overall market for new-energy vehicles.
According to Bloomberg News calculations, Tesla's market share in China dwindled to approximately 7.5% in the first quarter of 2024, down from 10.5% in the same period last year.
In addition to the ongoing workforce reductions, Tesla's China operations will welcome back Tom Zhu, who previously led the company's Asia Pacific operations and spearheaded its entry into the Chinese market, Bloomberg News reported on Wednesday. Zhu had been promoted to senior vice president of automotive in April 2023, overseeing global production, sales, deliveries, service, and the company's factories from Tesla's Austin headquarters.
Despite Tesla securing conditional approval from government authorities to implement its driver-assistance system in China, which is expected to provide an immediate revenue boost, the company has initiated layoffs. This approval was granted contingent upon several conditions, including finalizing a mapping and navigation agreement with Chinese tech giant Baidu Inc., and ensuring compliance with data-security and privacy standards.
In China, most of the laid-off employees will receive severance packages comprising one month's salary for every year worked, along with an additional three months' pay, as reported by one source. Some employees were escorted out of their workplaces by managers, while others departed in groups via shuttle buses, according to another source.
On a global scale, Tesla has witnessed a growing number of executive departures, with most of its 500-member Supercharger team and the newly formed marketing team being disbanded. Additionally, the company has rescinded internship offers just weeks before the programs were scheduled to commence.