Job Cuts Loom at China's SAIC, Plus JVs with GM, VW

Thousands of job cuts are planned at China’s joint ventures with General Motors and Volkswagen this year, sources have told Reuters.

SAIC Motor, a major state-owned carmaker, plans to cut 30% of employees at its joint venture with General Motors, 10% at its JV with Germany’s Volkswagen, plus half at Rising Auto electric-vehicle unit, two sources have revealed.

Large-scale workforce reductions are rare at China’s state-owned firms but come amid a cut-throat automotive price war as the nation’s economy falters. The cutbacks also reflect the drop in market share by SAIC and its partners amid the EV boom in China, because of strong competition from Tesla and private automakers such as BYD.

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The staff reductions won’t happen all at once in mass layoffs but are targeted for 2024, the sources said. A large portion will come through implementing stricter performance standards and offering payouts to lower-rated employees who resign, they said.

A SAIC spokesperson said Reuters’ “speculation” about staff downsizing is “not true” and that the company would not set targets for worker dismissals. SAIC did not respond to questions about efforts to get low-performers to resign or other staff-reduction strategies.

The company added that it had recruited 2,000 employees in the first two months of 2024 who will focus on software and new-energy vehicles.

A GM spokesperson in China said it would be “inaccurate” to say SAIC-GM is “reducing its workforce by 30%” but declined to elaborate. A VW China Group spokesperson said it did not plan layoffs and that it was incorrect to say SAIC-VW plans to cut 10% of its workforce.

The VW spokesperson declined to comment on whether the company had changed its employee performance reviews but called them a long-term mechanism and said SAIC-VW provides counselling and resources aiming to ensure every employee can be qualified for their job requirements.

Sales down by 16%

SAIC has been China’s biggest automaker for nearly two decades but saw its sales fall by 16% during the first two months of 2024 from a year earlier, according to an SAIC filing.

It employed 207,000 people at its parent company and major subsidiaries at the end of 2023, according to SAIC’s annual report.

One of the sources said most of the reductions at SAIC-VW would come through payouts offered to resigning low performers.

SAIC rates workers on a scale from A to D. In the past, the company has rarely handed out C or D ratings, the two sources said. For 2023, however, about 10% of SAIC-VW employees received the lower ratings, one of the people said.

The 10% target for job cuts at SAIC-VW applies to “white-collar professionals” rather than factory workers, the person said.

Such performance-based payouts are also being used at SAIC-GM, the person said. Reuters could not determine how widely the strategy is being employed at the GM joint venture, what other methods staff-reduction methods it might use, or whether factory workers are included in its alleged 30% target for job cuts.

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 of the sources said.

Sharp jump in EV sales by BYD, Tesla

The job cuts are a symptom of much larger problems for state-owned automakers and their foreign partners in the world’s biggest auto market.

SAIC Volkswagen was set up in 1985 and today makes the ID.3 electric car and Audi-branded vehicles, among other models.

SAIC-GM was established in 1997 and makes Chevrolets, Buicks and Cadillacs. But in recent years, SAIC and its foreign partners have seen steep drops in sales as BYD and Tesla have surged far ahead in the race to capture EV market share.

EV sales have risen sharply and now account for 23% of China’s car sales, with BYD and Tesla capturing by far the biggest shares of the electric sector.

China’s government granted Tesla a rare exception to its longstanding practice of making foreign automakers form joint ventures with state-owned enterprises.

Tesla set up a wholly-owned entity in 2018 to manufacture vehicles at its Shanghai factory – its biggest globally by output – as part of a government strategy to supercharge China’s EV supply chains and challenge domestic automakers to compete.

BYD answered the call. Its EV sales in China have rocketed from about 130,000 in 2020 to more than 1.5 million last year and its global EV sales surpassed Tesla late last year.

Last week, BYD chairman Wang Chuanfu predicted foreign brands would see their China market share plummet from 40% to 10% in the next three to five years.

As the industry’s electrification accelerates, the Chinese government has urged state-owned entities to be more efficient and less dependent on foreign partners. But SAIC still relies on its VW and GM partnerships for a large proportion of its sales and profits.