EXCLUSIVE – China’s SAIC aims to cut jobs at GM, VW Ventures and EV units, sources said. By Reuters

SHANGHAI (Reuters) – China’s SAIC Automobile aims to cut thousands of jobs this year from its joint ventures with General Motors (NYSE:) and Volkswagen (ETR:) and its electric vehicle division, two people with knowledge of the matter said. Lee told Reuters. .

The state-owned automaker hopes to cut staff by 30% at SAIC-GM, 10% at SAIC Volkswagen and more than half at its Rising Auto EV subsidiary, the sources said.

Large-scale workforce reductions are rare in state-owned Chinese companies, and a fierce automobile price war is taking place as the national economy falters. The cuts also reflect the explosion of electric vehicles in China, a sector where SAIC and its foreign partners have quickly lost market share to privately owned Chinese automakers led by Tesla (NASDAQ:) and BYD (SZ:).

Sources said that this staff reduction will not occur all at once due to mass layoffs, but is targeted for 2024. They said much would be gained by enforcing stricter performance standards and paying severance pay to lower-level employees.

A SAIC spokeswoman said Reuters’ “speculation” about job cuts was “untrue” and the company would not set a target for layoffs. SAIC did not respond to questions about its efforts to force low-performing employees to resign or other staff reduction strategies.

The company added that it has hired 2,000 employees in the first two months of 2024 who will 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%” but did not provide further details. A Volkswagen China Group spokeswoman said no “layoffs” were planned and that it was “incorrect” to say SAIC-VW planned to cut 10% of its workforce.

A Volkswagen spokeswoman declined to comment on whether the company had changed employee performance evaluations, but called it a “long-term mechanism” and said SAIC-VW would provide consultation and consultation to ensure “all employees are qualified for the job requirements.” They said they would provide resources. SAIC has been China’s largest automaker for nearly two decades, but sales fell 16% in the first two months of 2024 compared with the previous year, according to SAIC filings. SAIC employed 207,000 people across its parent company and major subsidiaries at the end of 2023, according to its annual report.

One of the sources said most of SAIC-VW’s cuts will be made through payouts to resigning underperforming employees. SAIC grades its employees from A to D. In the past, the company rarely gave C or D grades, two sources said. But by 2023, about 10% of SAIC-VW employees received low ratings, one of the officials said. D-grade employees will be offered severance pay and C-grade employees will be placed in ‘uncomfortable positions’ to encourage them to resign, the sources said. SAIC-VW’s 10% job reduction target applies to “white-collar professionals,” not factory workers, the official said. Such performance-based compensation is also being used at SAIC-GM, officials said. Reuters could not determine how widely this strategy is being adopted at the GM joint venture, what other methods of job reductions might be used, or whether factory workers would be included in the 30% job cuts target. Rising Auto, one of SAIC’s two EV units, also pays lower-level employees but plans to lay off some employees and not renew the contracts of others, one of the sources said.

left in the dust

The job cuts are a sign of a much bigger problem for the state-owned automaker and its foreign partners in the world’s largest auto market. SAIC Volkswagen was founded in 1985 and currently produces the ID.3 electric car and Audi brand vehicles. SAIC-GM was founded in 1997 and produces Chevrolet, Buick, and Cadillac. But in recent years, sales for SAIC and its overseas partners have fallen sharply as BYD and Tesla have surged ahead in the race for EV market share. EV sales have grown rapidly and now account for 23% of Chinese car sales, with BYD and Tesla holding by far the largest share of the electric segment.

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 companies. Tesla established a wholly-owned entity in 2018 to manufacture vehicles at its Shanghai plant, the world’s largest by production volume, as part of the government’s strategy to strengthen China’s EV supply chain development and challenge domestic automakers.

BYD answered the phone. Electric vehicle sales in China surged from about 130,000 units in 2020 to more than 1.5 million units last year, and global electric vehicle sales at the end of last year surpassed Tesla. 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 electrification of the industry accelerates, the Chinese government has urged state-owned enterprises to become more efficient and less dependent on foreign partners. But SAIC still relies on the VW and GM partnership for a significant portion of its sales and profits.