China’s SAIC Motor plans job cuts at GM, VW and EV units amid automotive industry challenges,

Chinese state-owned automaker SAIC Motor intends to significantly reduce its workforce at its joint ventures with General Motors (GM) and Volkswagen (VW), as well as at its electric vehicle (EV) subsidiary, Reuters reported citing sources.

The planned reductions include slashing 30 percent of employees at SAIC-GM, 10 percent at SAIC Volkswagen, and over half at its Rising Auto EV arm, it added.

The staff cuts are not expected to occur all at once through mass layoffs but are targeted for the year 2024. Sources indicate that a significant portion of the reductions will be achieved by enforcing stricter performance standards and providing payouts to lower-rated employees who choose to resign.

Sources suggested that most cuts at SAIC-VW will involve offering payouts to low-performing employees. SAIC evaluates employees on a scale from A to D, with a rare distribution of C or D ratings in the past. However, in 2023, around 10 percent of SAIC-VW employees received lower ratings.

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 source said.

Rare Workforce Reductions in State-Owned Enterprises

This move is uncommon for state-owned Chinese enterprises and comes amid intense competition in the automotive industry, the report added.

The auto sector faces a challenging price war, compounded by economic pressures in China. Additionally, the surge in demand for EVs has led to SAIC and its partners losing ground to competitors such as Tesla and domestic firms such as BYD, it added.

Responding to inquiries from Reuters, a spokesperson for SAIC denied the speculation about workforce downsizing, stating that the company does not set targets for worker dismissals. However, they did not address questions about strategies to encourage low-performing employees to resign.

SAIC highlighted its recent recruitment of 2,000 employees in early 2024, focusing on software and new-energy vehicles.

GM and VW representatives in China refrained from confirming the reported workforce reductions, stating inaccuracies in the figures provided.

SAIC, which has been China’s leading automaker for nearly two decades, experienced a 16 percent decline in sales during the first two months of 2024 compared to the previous year, according to company filings. The company employed approximately 207,000 people across its parent company and major subsidiaries by the end of 2023.

Auto Industry Dynamics

The job cuts underscore broader challenges faced by state-owned automakers and their foreign partners in China’s auto market. Despite being established decades ago, SAIC Volkswagen and SAIC-GM have seen sales decline as competitors such as BYD and Tesla dominate the EV segment.

Tesla’s exceptional entry into the Chinese market without a JV and BYD’s rapid growth has reshaped the landscape. Both companies have seized significant market shares, prompting predictions of a substantial decline in foreign brands’ market share in the coming years.

As China prioritises the electrification of its automotive industry, state-owned enterprises are urged to enhance efficiency and reduce reliance on foreign partnerships. However, SAIC still heavily depends on its alliances with VW and GM for a substantial portion of its sales and profits.

(With inputs from Reuters)

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Read More: China’s SAIC Motor plans job cuts at GM, VW and EV units amid automotive industry challenges,

2024-04-01 03:59:27

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