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Analysis of Reasons Behind Reports of Layoffs at Tesla’s Shanghai Factory

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Tesla’s Shanghai factory has reportedly initiated layoffs among its battery assembly workforce. Industry sources suggest that the majority of the layoffs will affect employees in the first phase of battery assembly, with the reduction expected to exceed 50%. While most of the affected individuals will be offered compensation through negotiations, a small number will be reassigned to other positions. Additionally, the equipment in the first phase of battery assembly will either be dismantled or relocated.

From a production capacity standpoint, Tesla’s Shanghai factory currently operates at a capacity of approximately 100,000 vehicles per month. In order to maintain product scarcity and brand image, the output is expected to be controlled within the range of 75% to 85%.

According to TrendForce’s understanding, the layoffs in the first phase of battery assembly are expected to be related to US government policies. The US government has imposed restrictions on subsidizing batteries imported from China and requires the use of locally manufactured batteries. As a result, export orders for batteries from Tesla’s Shanghai factory have been cut, leading to excess production capacity. Tesla, known for its efficiency-driven corporate culture, is intolerant of resource wastage.

On another note, the reduction in capacity and production volume of the first phase of battery assembly by Tesla may indicate preparations for transferring some of the capacity to the United States. By completing the battery pack manufacturing process in the United States, Tesla aims to increase the proportion of the value chain related to battery production in the US, in order to qualify for the full subsidy of USD 7,500 per vehicle in the United States.

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