Tesla Cuts Jobs In China After Beijing Greenlights Its Self-Driving System: Here's Why

Tesla is reportedly escalating its workforce reductions in China as part of its strategy to decrease its global headcount by over 10 percent.

Additional layoffs commenced earlier this week, building on the cuts initiated in mid-April.

The layoffs span across various departments, including customer service, engineering, production, and logistics at Tesla's Shanghai facility, which accounts for more than half of the company's global output, Bloomberg reported citing people familiar with the matter.

The recent layoffs affect different employee groups compared to those last month, which targeted primarily sales personnel.

The exact number of employees impacted by these latest cuts remains undisclosed, and the potential effects on Tesla’s operations in China are currently unclear.

Amidst a global slowdown in electric vehicle (EV) demand, Tesla's job reductions in China come at a time when the company is facing intense competition and a decline in consumer interest within the region.

Data indicates a significant drop in shipments from its Shanghai factory, with an 18 percent decrease in April, despite a 33 percent growth in the overall market for new-energy vehicles.

Tesla's market share in China has also declined, falling from 10.5 percent in the first quarter of the previous year to about 7.5 percent in the first quarter of 2024.

In response to these challenges, Tesla will see the return of Tom Zhu to its China operations. Zhu, who was recently promoted to senior vice president of automotive, had a pivotal role in Tesla's initial expansion into China.

The layoffs come even as Tesla has received in-principle approval from Chinese authorities to deploy its 'Full Self Driving (FSD)' driver-assistance system in the country, a move that could potentially boost its revenue.

The approval, contingent on certain conditions, includes a mapping and navigation agreement with Baidu, and adherence to data security and privacy standards.

Most of the laid-off employees in China would reportedly receive compensation, including one month's salary for each year of service and an additional three months' salary.

The company is also experiencing significant changes globally, with numerous executives departing and significant reductions in its Supercharger and newly established marketing teams.

Moreover, Tesla is rescinding offers just weeks before internships were set to start. 

Also Read: While Mobile Manufacturing Booms In India, Chinese Smartphone Firm Xiaomi Finds Itself In Soup With Falling Profit