According to a report from “Shi Fang Zhi Xing,” Tesla’s Shanghai factory has initiated layoffs for employees involved in battery assembly. The first phase of battery assembly will be most affected, with over 50% of employees being laid off. While most will receive negotiated compensation, a few will be reassigned to different positions. Equipment from the first phase will also be either dismantled or relocated.

Reasons for Layoffs

US government policies prohibiting subsidies for imported Chinese batteries and mandating the use of locally manufactured batteries in the US；

Canceled export orders for batteries from Tesla’s Shanghai factory, leading to excess production capacity；

Tesla’s focus on efficiency and avoidance of resource waste.

Nonetheless, the vehicle manufacturing team at Tesla’s Shanghai factory remains unaffected as the company’s main business. In order to meet the growing production demand, Tesla continues to expand its workforce. With the delivery of 1.3 million vehicles last year, Tesla aims to deliver at least 1.8 million by 2023, necessitating the improvement of production capacity. Tesla sold 93,680 domestically produced cars in June alone, seeing a year-on-year increase of 18.72% and a month-on-month growth of 20.57% according to the China Passenger Car Association (CPCA).

Impact on Suppliers

The layoffs also extend to Tesla’s battery cell suppliers, CATL and LG Nanjing factory. Both suppliers have had to adjust their production plans and equipment investment due to the decrease in Tesla’s battery orders. CATL has shifted its focus to the energy storage sector, while LG is actively seeking new customers.