Thousands of job cuts are planned at China’s joint ventures with General Motors and Volkswagen this year, sources have told Reuters.
SAIC Motor, a major state-owned carmaker, plans to cut 30%
of employees at its joint venture with General Motors, 10% at its JV with
Germany’s Volkswagen, plus half at Rising Auto electric-vehicle unit, two
sources have revealed.
Large-scale workforce reductions are rare at China’s
state-owned firms but come amid a cut-throat automotive price war as the
nation’s economy falters. The cutbacks also reflect the drop in market share by
SAIC and its partners amid the EV boom in China, because of strong competition
from Tesla and private automakers such as BYD.
The staff reductions won’t happen all at once in mass
layoffs but are targeted for 2024, the sources said. A large portion will come
through implementing stricter performance standards and offering payouts to
lower-rated employees who resign, they said.
A SAIC spokesperson said Reuters’ “speculation” about staff
downsizing is “not true” and that the company would not set targets for worker
dismissals. SAIC did not respond to questions about efforts to get
low-performers to resign or other staff-reduction strategies.
The company added that it had recruited 2,000 employees in
the first two months of 2024 who will focus on software and new-energy
vehicles.
A GM spokesperson in China said it would be “inaccurate” to
say SAIC-GM is “reducing its workforce by 30%” but declined to elaborate. A VW
China Group spokesperson said it did not plan layoffs and that it was incorrect
to say SAIC-VW plans to cut 10% of its workforce.
The VW spokesperson declined to comment on whether the
company had changed its employee performance reviews but called them a
long-term mechanism and said SAIC-VW provides counselling and resources aiming
to ensure every employee can be qualified for their job requirements.
Sales down by 16%
SAIC has been China’s biggest automaker for nearly two
decades but saw its sales fall by 16% during the first two months of 2024 from
a year earlier, according to an SAIC filing.
It employed 207,000 people at its parent company and major
subsidiaries at the end of 2023, according to SAIC’s annual report.
One of the sources said most of the reductions at SAIC-VW
would come through payouts offered to resigning low performers.
SAIC rates workers on a scale from A to D. In the past, the
company has rarely handed out C or D ratings, the two sources said. For 2023,
however, about 10% of SAIC-VW employees received the lower ratings, one of the
people said.
The 10% target for job cuts at SAIC-VW applies to
“white-collar professionals” rather than factory workers, the person said.
Such performance-based payouts are also being used at
SAIC-GM, the person said. Reuters could not determine how widely the strategy
is being employed at the GM joint venture, what other methods staff-reduction
methods it might use, or whether factory workers are included in its alleged
30% target for job cuts.
Rising Auto, one of two SAIC EV units, is also offering
payouts to low-rated employees but will also dismiss some workers and not renew
the contracts of others, one of the sources said.
Sharp jump in EV sales by BYD, Tesla
The job cuts are a symptom of much larger problems for
state-owned automakers and their foreign partners in the world’s biggest auto
market.
SAIC Volkswagen was set up in 1985 and today makes the ID.3
electric car and Audi-branded vehicles, among other models.
SAIC-GM was established in 1997 and makes Chevrolets, Buicks
and Cadillacs. But in recent years, SAIC and its foreign partners have seen
steep drops in sales as BYD and Tesla have surged far ahead in the race to
capture EV market share.
EV sales have risen sharply and now account for 23% of
China’s car sales, with BYD and Tesla capturing by far the biggest shares of
the electric sector.
China’s government granted Tesla a rare exception to its
longstanding practice of making foreign automakers form joint ventures with
state-owned enterprises.
Tesla set up a wholly-owned entity in 2018 to manufacture
vehicles at its Shanghai factory – its biggest globally by output – as part of
a government strategy to supercharge China’s EV supply chains and challenge
domestic automakers to compete.
BYD answered the call. Its EV sales in China have rocketed
from about 130,000 in 2020 to more than 1.5 million last year and its global EV
sales surpassed Tesla late last year.
Last week, BYD chairman Wang Chuanfu predicted foreign
brands would see their China market share plummet from 40% to 10% in the next
three to five years.
As the industry’s electrification accelerates, the Chinese
government has urged state-owned entities to be more efficient and less
dependent on foreign partners. But SAIC still relies on its VW and GM
partnerships for a large proportion of its sales and profits.