Tesla Inc. is laying off some electric-vehicle battery workers at its Shanghai plant, people familiar with the matter said, just as a bruising price war among manufacturers in China is showing signs of easing.
The carmaker began notifying some employees on its battery assembly lines about the decision earlier this week, the people said, asking not to be identified because they’re not authorized to speak publicly.
Some have been given the option to transfer to another workshop such as stamping, painting or general assembly, the people said. It’s not clear how many workers may be let go, or the specific reasons behind the layoffs.
Representatives for Tesla in China didn’t respond to a request for comment.
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Around 20,000 staff are employed at Tesla’s Shanghai factory, which has the capacity to churn out about 1 million EVs a year and is the source of more than half of the US company’s global output.
While Tesla uses batteries made by LG Energy Solution Ltd. and Contemporary Amperex Technology Co. Ltd., they need to be built into battery modules and packs before they’re installed in a vehicle. Much of that process is done at Tesla’s battery workshop.
Some automation equipment that could help replace human labor on the battery production line is in the design and construction phase, one of the people said.
Austin, Texas-based Tesla is on a tear at the moment, both in China and abroad. Deliveries from Shanghai rose almost 20% from a year earlier in June to 93,680 vehicles and the company delivered a record number of cars globally in the second quarter.
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Still, Tesla’s operating margin shrank to 11.4% in the first quarter, a roughly two-year low, after the company marked down its EVs in January and March. Chief Executive Officer Elon Musk implemented several rounds of price cuts and has said he is comfortable making less money on each car sold.
China has tried to apply the brakes on the price-cutting trend, with authorities bringing Tesla and more than a dozen major local automakers together Thursday to sign a pledge on maintaining fair competition and avoiding “abnormal pricing.”
While not another direct price cut, Tesla subsequently said it would provide a fresh round of incentives to buyers of Model 3 and Y EVs in China, including 3,500 yuan ($480) in cash, if they were referred by another Tesla owner.
(Updates with details on latest incentives in final paragraph.)
