China’s monopolistic SAIC Motor, GM and VW Venture aim to cut jobs at EV divisions, people said By: Reuters

SHANGHAI (Reuters) – China’s SAIC Motor Co. aims to cut thousands of jobs this year at its joint ventures with General Motors Co (NYSE:) and Volkswagen (ETR:) and its electric vehicle division, according to people familiar with the matter. Two people involved told Reuters. .

The company wants to cut 30% of SAIC GM’s workforce, 10% of SAIC Volkswagen’s workforce and more than half of its subsidiary Rising Auto EV’s workforce, the people said.

Large-scale layoffs are rare in China’s state-run companies and come amid fierce car price competition as China’s economy slumps. The cuts also reflect the explosive uptake of electric vehicles in China, where SAIC and its foreign partners are rapidly gaining market share with Chinese private automakers led by Tesla (NASDAQ:) and BYD (SZ:). market share is being taken away.

Sources familiar with the matter say the job cuts will not be mass layoffs and are targeted for 2024. Much of that will be paid for, they said, by introducing stricter performance standards and providing payments to low-rated employees who leave the company.

A SAIC Motors spokesperson said Reuters’ “speculation” about layoffs was “not true” and said the company would not set a target for layoffs. SAIC Motor did not respond to questions about efforts to force underperformers to resign or other job-reduction strategies.

The company added that it has hired 2,000 employees in the first two months of 2024 to focus on software and new energy vehicles.

A GM China spokeswoman said it was “inaccurate” to say SAIC GM was “reducing its workforce by 30%,” without providing further details. A spokesperson for VW China Group said there were no plans for “retrenchments” and that it was “false” to say SAIC VW was planning to cut its workforce by 10%.

A VW spokesperson declined to comment on whether the company had changed its employee performance evaluations, but called it a “long-term mechanism” and said SAIC-VW said that “all employees are not subject to job requirements.” The company said it provides counseling and resources to help people meet the qualifications they meet. SAIC Motor Corporation has been China’s largest automaker for nearly two decades, but sales in the first two months of 2024 fell 16% from a year earlier, according to SAIC filings. According to SAIC Motor’s annual report, the parent company and major subsidiaries had 207,000 employees at the end of 2023.

Most of SAIC-VW’s job cuts will be covered by benefits to underperforming retirees, one of the people said. SAIC rates its employees on a scale of A to D, but in the past the company had rarely given C or D grades, two people said. However, one of the people said that about 10% of SAIC VW employees received low ratings for 2023. Employees with a D rating are offered severance packages, and those with a C rating are placed in an “unpleasant position” designed to encourage them to leave, the people said. SAIC VW’s 10% workforce reduction target will apply to “white-collar professionals” rather than factory workers. According to people familiar with the matter, this type of performance-based pay is also used at SAIC GM. Reuters asked how widely this strategy has been adopted at the GM joint venture, what other layoff techniques it may adopt, and whether the 30% headcount reduction target includes factory workers. It was not possible to say whether it would be possible. Rising Auto, one of SAIC Motor’s two EV division companies, also provides benefits to employees with poor evaluations, but has fired some employees and renewed the contracts of others. No, one of the people said.

left in the dust

The job cuts are a symptom of a much larger problem for the state-owned automaker and its foreign partners in the world’s biggest car market. SAIC Volkswagen was founded by him in 1985 and today he manufactures vehicles such as the ID.3 electric car and Audi branded vehicles. SAIC GM was founded in 1997 and manufactures Chevrolet, Buick, and Cadillac. But in recent years, sales for SAIC and its overseas partners have fallen sharply as BYD and Tesla have made significant advances in the race for EV market share. EV sales have grown rapidly and now account for 23% of China’s car sales, with BYD and Tesla holding by far the largest share of the electric sector.

The Chinese government has granted Tesla a rare exception to its long-standing practice of forcing foreign automakers to form joint ventures with state-owned enterprises. Tesla established a wholly owned subsidiary in 2018 to build vehicles at its Shanghai factory, the world’s largest by output, as part of a government strategy to accelerate the development of China’s EV supply chain and challenge domestic automakers.

BYD answered the call. The company’s EV sales in China soared from about 130,000 in 2020 to more than 1.5 million last year, and global EV sales surpassed Tesla’s at the end of last year. Last week, BYD Chairman Wang Chuanfu predicted that foreign brands’ market share in China would plummet from 40% to 10% in the next three to five years.

As industry electrification accelerates, the Chinese government is pushing state-owned enterprises to become more efficient and less dependent on foreign partners. However, SAIC still relies on the partnership between VW and GM for most of its sales and profits.