Tesla is stepping up its job cuts in China as it grapples with a slowdown in sales, sources familiar with the matter revealed. The electric car giant initiated further layoffs earlier this week, building on reductions made in mid-April as part of its plan to trim global staff by over 10%. The latest round of cuts impacts various departments at Tesla's Shanghai facility, which produces more than half of the company's global output, including customer service, engineering, production, and logistics teams. While the exact number of affected employees and the implications for Tesla's operations in China remain unclear, the move underscores the challenges faced by the company in the world's largest automotive market.
Tesla's woes in China reflect broader trends in the electric vehicle (EV) sector, with a global downturn in demand prompting the company's largest-ever layoffs. However, the situation in China is exacerbated by stiff competition from domestic rivals like BYD Co. and subdued consumer confidence, leading to an 18% drop in shipments from Tesla's Shanghai factory in April despite a 33% growth in the overall market for new-energy vehicles.
The company's market share in China has also taken a hit, declining to approximately 7.5% in the first quarter of 2024 from 10.5% in the same period last year. In a bid to revitalize its China business, Tesla is bringing back Tom Zhu, who previously spearheaded the carmaker's Asia Pacific operations and facilitated its entry into the Chinese market.
Despite the layoffs, Tesla recently secured conditional approval from Chinese authorities to deploy its driver-assistance system in the country, which is expected to provide an immediate revenue boost. However, the company is facing challenges on multiple fronts, with reports of laid-off employees receiving severance packages equivalent to one month's pay for each year worked, plus an additional three months' salary.
The situation isn't limited to China, as Tesla has witnessed a wave of executive departures globally, along with significant layoffs within its Supercharger and marketing teams. Additionally, the company has reportedly rescinded internship offers just weeks before they were set to begin, signaling broader upheaval within the organization.
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