Are these car companies laying off employees?

China News Weekly

2024-06-25 09:37Published on the official account of China News Weekly in Beijing

According to the Asahi Shimbun, Nissan Motor has announced the closure of its passenger car plant in Changzhou, Jiangsu Province, on June 21. Due to the decline in sales, Nissan Motor has decided to reduce its production capacity in China by about 10%.

Are these car companies laying off employees?

Screenshot of the Asahi Shimbun report

According to the data, Nissan's total production in China is 1.6 million units, with the Changzhou plant accounting for 8% of its production. In terms of sales, Nissan has been declining year-on-year in China for five consecutive years. A Nissan spokesperson said, "This is to optimize production." Some insiders broke the news that after the factory was closed, most of the layoffs would give at least N+1 compensation, but a small number of senior executives went to other bases or resigned and left.

Image source: Dongfeng Nissan

At this stage, "personnel optimization" is not a new topic in the automotive industry.

According to foreign media reports, as of June 17, there were 121,000 people on Tesla's latest "everyone" mailing list, compared with Tesla's total global employees of 140,000 (including salaried employees and hourly employees) at the end of December last year, the number of employees in the company has been reduced by 14%. In April this year, Tesla CEO Elon Musk announced the layoff, with the layoff rate exceeding 10%. At the same time, Musk said in an email: "Tesla will conduct a full review in the coming weeks to grant stock options to employees who perform well." ”

Since the beginning of this year, whether it is a traditional automobile manufacturing company with a decline in sales, or a new energy vehicle company on the tuyere, or even upstream and downstream parts companies, there has been news of layoffs. At the moment when involution is intensifying, reducing costs and increasing efficiency has become the consistent goal of the industry.

Reduce costs and increase efficiency, and optimize personnel

At the recent China Automobile Chongqing Forum, Zeng Qinghong, chairman of Guangzhou Automobile Group, said that the purpose of enterprises is to make profits, contribute to the country and society, pay taxes and create jobs. However, the current market competition is too fierce, "rolling down is not the way", layoffs in the industry are common, and GAC Group is no exception.

Not long ago, Guangqi Honda recruited voluntary resignation from its production staff, and about 1,700 people have already applied, accounting for 14% of the total number of employees in the joint venture. From January to April this year, Guangqi Honda sold 141,600 units, a year-on-year decrease of 19.01%.

It's not just the GAC Group. Volkswagen Group has set up a performance program called "KI 10" for all of its companies to reduce fixed and personnel costs by 20 percent over three years, according to an internal document released by the Volkswagen Group on May 30. The paper, released by Volkswagen Group China's Chairman and CEO Bratt Brad, and others shows that China's fierce market environment has put additional pressure on the company's financial performance, and Volkswagen urgently needs to focus on a more efficient organization that leverages synergies across entities and departments to achieve the goal of reducing indirect personnel costs by 20%.

In this regard, Volkswagen China said that the project was proposed by the headquarters, and it is based on 2023, and will achieve a 20% increase in efficiency in 2024, 2025, and 2026, reducing indirect labor costs including travel and administration, but it is not equivalent to layoffs.

Nowadays, new energy vehicles continue to seize the market share of traditional fuel vehicles, and it is an indisputable fact that the decline in sales of traditional automobile manufacturers is facing the problem of transformation. On the other hand, the seemingly strong new EV manufacturers are jumping back and forth between "scaling up" and "personnel optimization". When a product becomes popular, it expands rapidly, and if it does not develop as expected, it will quickly reduce its staff. It seems that it was still yesterday for practitioners to discuss "the new forces are well treated, hurry up and get on the ship", and soon, their topics were changed to "have you received a gift package" and "have you graduated".

In 2023, Li Auto will become the first profitable brand among the new forces. This year, Li Auto's revenue exceeded 100 billion yuan for the first time, and its net profit exceeded 10 billion. However, recently, Li Auto has also been optimizing its personnel. Relevant information shows that the overall optimization ratio of Li Auto is more than 18%. According to Li Auto's 2023 financial report, the company has nearly 31,600 employees, a year-on-year increase of 63%. According to the optimization ratio, this round of optimization exceeded 5,600 people. However, after the large-scale layoffs began, Li Auto recalled some of the laid-off employees in key positions, and some test-end employees have been notified of the recall.

Image source: Li Auto

The reason for the ideal adjustment of the staff structure has a certain relationship with the fact that the development momentum is not as expected. The launch of the first pure electric vehicle, the Mega, which is expected to be unfavorable, has also affected the pace of the promotion of Li Auto's pure electric models. A number of Li Auto executives have repeatedly declared that Mega will become the No. 1 sales volume in the luxury car market of more than 500,000 yuan, and will become an important support for Li Auto's sales target of 800,000 units this year. However, the reality is that Mega encountered major public opinion after its listing, and its sales did not meet expectations.

Industrial reshuffle and interest reconstruction

The pressure brought about by the involution of the automotive industry is continuing to be released.

Since the beginning of 2023, a price war that has swept the automotive industry has continued to spread, and the profit margins of the automotive industry are low. Judging from the annual sales volume, the price war did not drive additional growth in the total sales volume of the market, but changed the distribution of sales among different brands, and the profits of many car companies also fell sharply.

The data shows that from January to April 2024, the cumulative revenue of the automotive industry will be 3,074.2 billion yuan, a year-on-year increase of 8%; the cost was 2,688.2 billion yuan, a year-on-year increase of 8%; profit was 142.8 billion yuan, a year-on-year increase of 29%; The automotive industry has a historically low profit margin of 4.6%.

Cui Dongshu, secretary general of the National Passenger Car Market Information Association, said in the article that with the expansion of the production scale of the auto market, the decline of PPI (industrial producer price index) and the decline in the cost of upstream lithium carbonate, the profits of car companies have generally improved slightly, but they are still low compared to the average profit margin of the overall industrial enterprises.

Cui Dongshu believes that the current automotive industry fuel vehicles are still profitable, but the market is shrinking rapidly; Although the new energy vehicle market is growing rapidly, it is losing a lot of money.

At present, most new energy vehicle companies have not yet achieved profitability, and the "price war" has made many car companies even more passive. From the perspective of profitability, Toyota, which has been frequently questioned in the electrification transformation, will even exceed the profits of the top 10 car companies in China in 2023.

At the same time, the redistribution of interests in the automotive industry is also taking place at the same time. In the era of traditional internal combustion engines, vehicle manufacturers such as Toyota and Volkswagen occupied the absolute right to speak in the automotive industry chain, but now, parts suppliers such as CATL and LG Chem have risen.

For traditional fuel vehicle companies that are in the critical period of transformation to new energy vehicles, they need to invest a lot of money in research and development of new technologies and update production lines. In this process, the large number of personnel accumulated under the original production technology conditions may be difficult to adapt to the new development needs, resulting in layoffs.

It is worth noting that although the sales of new energy vehicles are still growing, the growth rate is slowing down. According to the China Association of Automobile Manufacturers, the sales of new energy vehicles in 2023 will increase by about 38% year-on-year. In 2021 and 2022, the sales growth rate of new energy vehicles will be 157% and 93%, respectively.

In a complex situation, more and more companies are emphasizing the importance of "long-termism". Zeng Qinghong said that the new energy vehicles are for environmental protection, energy conservation and energy security. In the future, it should be a multi-energy structure, and from the perspective of long-termism, it should be coexisting, and it should not be "one size fits all". In Zeng Qinghong's view, the automotive industry should "adhere to long-termism and focus on long-term development".

In today's increasingly competitive and diluted profits in the automobile industry, internal adjustments are inevitable in order to cope with the new development pattern, whether it is a traditional automobile company or a new force in the car industry. The electrification and intellectualization of automobiles have also brought new opportunities and put forward new requirements for talents. The reshuffle of the industry is not only the survival of the fittest, but also a test that practitioners must face.

Author: Liu Shanshan

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