Tesla Inc., the renowned electric vehicle (EV) manufacturer, has made the decision to lay off some of its electric-vehicle battery workers at its Shanghai plant. This move comes at a time when a fierce price war among manufacturers in China is beginning to show signs of easing. Although the specific reasons behind the layoffs and the exact number of affected employees remain undisclosed, some individuals familiar with the matter have shed light on the situation. This article delves into the details of the layoff announcement, shedding light on its potential implications for Tesla and the Chinese EV market.

‍

Layoff Announcement

According to sources familiar with the matter, Tesla has initiated the process of notifying certain employees on its battery assembly lines regarding the upcoming layoffs. While the company has not publicly disclosed the specifics, a few employees have reportedly been offered the option to transfer to other workshops such as stamping, painting, or general assembly. This move suggests Tesla's intent to optimize its workforce distribution. However, it remains uncertain how many workers will be affected by the layoffs and the underlying reasons behind the decision.

‍

Tesla's Shanghai Factory and Battery Production

Tesla's Shanghai factory, currently employing approximately 20,000 staff, plays a crucial role in the company's global production. With a production capacity of around 1 million EVs annually, the facility contributes to more than half of Tesla's worldwide output. While Tesla utilizes batteries manufactured by LG Energy Solution Ltd. and Contemporary Amperex Technology Co. Ltd., the battery assembly process is conducted at the company's Shanghai plant. This process involves building battery modules and packs before integrating them into the vehicles. Sources suggest that Tesla is exploring the implementation of automation equipment to replace human labor in battery production, with some equipment already in the design and construction phase.

‍

Tesla's Successes Amidst Challenges

Despite the recent layoffs, Tesla has been experiencing significant success both in China and globally. In June, the company's deliveries from the Shanghai plant witnessed a remarkable 20% year-on-year increase, reaching a total of 93,680 vehicles. Furthermore, Tesla achieved record-breaking vehicle deliveries worldwide during the second quarter. However, the company's operating margin dipped to 11.4% in the first quarter, reaching a two-year low. This decline was primarily attributed to price markdowns implemented by CEO Elon Musk in January and March. Musk has expressed his willingness to accept reduced profits per car sold, highlighting the company's commitment to increasing market penetration.

‍

China's Efforts to Address Pricing Concerns

Recognizing the need to address the price-cutting trend in the Chinese EV market, authorities in China recently convened a meeting that brought together Tesla and numerous local automakers. During this meeting, participants pledged to maintain fair competition and avoid "abnormal pricing." While this did not result in a direct price cut, Tesla subsequently announced a fresh round of incentives for buyers of Model 3 and Y EVs in China. These incentives include a cash reward of 3,500 yuan ($480) for customers referred by existing Tesla owners.