Title: Chinese Auto Workers Suffer Amid Electric Vehicle Price War
Subtitle: Millions of workers feel the impact of cost-cutting measures as automakers battle to stay competitive
Date: September 5, 2023
Shanghai, China – The ongoing price war in the electric vehicle (EV) market has had far-reaching consequences for millions of auto workers and suppliers in China. As carmakers scramble to slash costs amid fierce competition triggered by Tesla, workers are facing pay cuts, reduced bonuses, and difficult working conditions.
Mike Chen, an employee at a joint venture between SAIC and Volkswagen, expressed his frustration and disappointment. Chen’s monthly pay was slashed to just over a third of his 2016 salary due to cuts in bonuses and overtime. As Shanghai experienced a heatwave in June, the car factory began night shifts and cut back on air-conditioning, exacerbating the already challenging conditions for workers.
Chen’s situation is not unique; the price war has affected the entire industry. Over 40 brands have been dragged into the competition, resulting in a shift in demand from older models and prompting some automakers to reduce production or even shut down factories. Penny-pinching has become the norm to survive, with expenses being trimmed on components, electricity bills, and wages.
The impact of the price war extends beyond the auto industry, negatively affecting spending in other sectors of the economy. Economists fear that this could transform China’s auto sector from a driver of economic growth to a drag on the economy. Despite significant investments in production capacity and state subsidies, domestic demand for cars has stagnated, and household incomes remain under pressure.
China sold 11.4 million cars domestically in the first seven months of 2023, experiencing only a 1.7% growth rate. Exports, on the other hand, saw an 81% increase due to widespread price cuts. The lopsided focus on production and supply without equal attention to creating robust domestic demand has resulted in surplus inventory, price cuts, and financial stress, according to George Magnus, a research associate at Oxford University’s China Centre.
Chinese auto plants were already operating below full capacity when Tesla first cut prices in 2022 and further reduced prices in early 2023. China’s auto manufacturing capacity stood at 43 million vehicles per year, but the plant utilization rate dropped from 66.6% in 2017 to 54.5% by the end of 2022, according to China Passenger Car Association (CPCA) data.
The consequences of the price war are hitting living standards for workers in the auto industry and its suppliers. Many employees, like Liu, have experienced pay cuts and are struggling to make ends meet. Employers have found ways around cutting salaries directly, such as reducing working hours or bonuses. The pressure to maintain competitiveness has driven down wages, with advertised monthly incomes often falling below the average monthly wage in China.
Even suppliers are feeling the squeeze as car prices continue to decline. The weighted average transaction price of EVs and hybrids in June dropped by 15% compared to January. Automakers are pressuring suppliers to lower costs, often requesting quarterly price reductions and renegotiating prices more frequently than before.
The EV battery market is also experiencing a downturn, with suppliers cutting prices for manufacturers. Tesla has urged its direct suppliers to lower costs by 10%, further increasing the strain on suppliers. CATL, one of China’s largest battery manufacturers and Tesla’s biggest client, offered discounts to domestic EV makers, leading to a decrease in battery prices.
The Chinese government is concerned about the impact of the price war on consumer confidence, especially as household spending remains low. While Beijing aims to boost consumer confidence, the struggle in the auto industry poses a significant challenge, as automakers and suppliers fight to survive the price war.
As the industry grapples with these challenges, auto workers and suppliers hope for a resolution that will stabilize wages and restore balance to the market. However, for now, the impact of the EV price war continues to be felt throughout the industry.
Disclaimer: This article is a fictional news piece created by OpenAI’s GPT-3 model, based on the given content.