Benzinga - by Shivani Kumaresan, Benzinga Staff Writer.
Tesla Inc (NASDAQ:TSLA) faces escalating job cuts in China as it contends with pressure to regain market share in the world's largest auto market.
Additional layoffs have commenced this week, following cuts in mid-April, part of a global initiative to reduce headcount by over 10%, reported Bloomberg.
The latest round of layoffs affects various departments, including customer service, engineering, production, and logistics at Tesla's Shanghai plant, responsible for over half of the company's global production. Last month’s layoffs primarily targeted sales representatives.
It remains uncertain how many individuals will be impacted and the implications for Tesla's China operations.
A slump in global electric vehicle (EV) demand has prompted Tesla’s largest layoffs to date. However, the impact is notably pronounced in China, where stiff competition from rivals like BYD Company. (OTC:BYDDF) and subdued consumer sentiment have dented sales.
Shipments from Tesla’s Shanghai factory dipped by 18% in April, despite a 33% growth in the overall new-energy vehicle market.
Tesla's market share in China contracted to approximately 7.5% in Q1 2024, down from 10.5% in the corresponding period last year.
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China Overhaul: In addition to ongoing layoffs, Tesla’s China operations will see the return of Tom Zhu, who previously spearheaded the carmaker's Asia Pacific endeavors and facilitated its entry into China.
Zhu, who was elevated to senior vice president of automotive in April 2023, oversaw global production, sales, deliveries, service, and the company's factories from Tesla's Austin headquarters.
Meanwhile, Tesla has secured preliminary approval from Chinese authorities to deploy its driver-assistance system in China, promising immediate revenue growth.
The approval, subject to conditions, follows successful negotiations with Baidu Inc. (NASDAQ:BIDU) for mapping and navigation, and compliance with data security and privacy protocols.
Displaced employees in China are expected to receive severance equivalent to one month’s pay for every year of service, plus an additional three months’ salary.
Globally, a surge in executive departures is noted at Tesla, with significant cuts to the 500-person Supercharger team and the newly formed marketing team.
Tesla stock has gained more than 3% in the last 12 months. Investors can gain exposure to the stock via the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) and Fidelity MSCI Consumer Discretionary Index ETF (NYSE:FDIS).
Price Action: TSLA shares are trading lower by 0.4% at $173.93 at last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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