Tesla is reportedly laying off some battery production workers at its Giga Shanghai plant, according to sources familiar with the matter, speaking with Bloomberg. This move comes amidst a fierce price war in China, where car manufacturers are heavily discounting their vehicles.
The US electric carmaker began notifying employees on the cell assembly lines of the first phase of its factory in Shanghai earlier this week, the sources said, requesting anonymity as they are not authorized to speak publicly. Some staff have been given the option to transfer to other workshops such as stamping, painting, or general assembly. The exact number of workers affected and the specific reasons behind the layoffs remain unclear.
Tesla’s Shanghai factory, which employs around 20,000 staff, has the capacity to produce about 1 million cars a year. While Tesla uses batteries made by LG Energy Solution Ltd. and Contemporary Amperex Technology Co. Ltd., these cells need to be built into battery modules and packs before being installed in a vehicle, a process largely carried out at Tesla’s battery workshop.
According to one source, some automation equipment that could replace human labor on the battery production line is currently in the design and construction phase.
Despite these layoffs, Tesla continues to perform well both in China and globally. Deliveries from the Shanghai plant rose nearly 20% year-on-year in June to 93,680 vehicles, suggesting that the turmoil caused by the price war may be subsiding. The company also reported a record number of global car deliveries in the second quarter, with the figure of 466,140 vehicles exceeding Wall Street estimates.
However, Tesla’s operating margin shrank to 11.4% in the first quarter, a roughly two-year low, following several rounds of price cuts. CEO Elon Musk has stated his comfort with making less money on each car sold. Earlier this week, Tesla, along with several other automakers in China, pledged to maintain fair competition and avoid “abnormal pricing” in the world’s largest EV market.
