Automotive Exports September 2023

according to Chinese state media – are
hitting living standards at a time when
Beijing desperately wants to lift consumer
confidence from near record lows.
Cutting salaries is illegal in China, but
complex pay structures offer ways around
this.
SAIC-VW, for example, reduced Mike Chen’s
take-home pay by reducing working hours
and cutting bonuses without tinkering with
his base pay, which typically covers up to
half the compensation workers expect
when they join.
BYD, China’s largest EV maker, advertised a
position in August at its Shenzhen factory
with an estimated monthly income of
5,000-7,000 yuan, but the base salary was
2,360 yuan ($324).
The average monthly wage in China
was 11,300 yuan in June, according to
government data.
A Reuters analysis of the estimated income
included in recent job adverts from 30 auto
firms showed hourly salaries of 14 yuan
($1.93) to 31 yuan ($4.27), with Tesla, SAIC-
GM, Li Auto and Xpeng at the higher end.
Auto worker Liu, 35, said he quit Changan
Automobile’s plant in Hefei in July after
earning 4,000 yuan in both May and June,
rather than the 7,000 he expected each
month. Based on his past experiences,
Liu was confident he would quickly find
another auto job, but the market had
turned.
“The good old days are gone,” said Liu,
speaking on condition of partial anonymity
to protect his job prospects.
Changan Automobile said working hours
and pay varied from worker to worker.
Several automakers, including Mitsubishi
Motors and Toyota, have laid off thousands
in China after sales slumped. Others, such
as Tesla and battery maker CATL, have
slowed hiring as they delayed expansions.
Hyundai and its Chinese partner,
meanwhile, are trying to sell a plant in
Chongqing.
After being rejected by Li Auto and Xpeng,
Liu almost got a job at Chery’s plant in the
eastern port of Qingdao through a labor
agent, but he refused to pay him a 32,000
yuan commission to secure the position.
“Some factories exhaust you and are willing
to pay you more. Some factories exhaust
you but are stingy. Some factories don’t
exhaust you but starve you as salaries are
too low,” Liu said.
“Maybe I’d be better off as a security
worker in some office building.”
It has been a similarly brutal environment
for auto suppliers in China as car prices
have continued to fall, with the weighted
average transaction price of EVs and
hybrids in June down 15% from January
at 185,100 yuan. SAIC-VW, for example,
offered over half a billion dollars in cash
subsidies for car buyers in March and
a discount of just over $5,100 on its
ID.3 electric hatchback for a period in
July. State-run China Automotive News
estimates there are over 100,000 auto
suppliers in the country. In a March survey
of nearly 2,000 by auto parts trading
platform Gasgoo, 74% said automakers had
asked them to reduce costs. More than
half were asked for reductions of 5% to
10%, higher than the 3% to 5% targets of
previous years. Nine out of 10 companies
expected more such requests this year.
Suppliers typically negotiate prices once a
year, but many have been pressed to lower
prices every quarter in 2023, two senior
executives at auto suppliers said.
Before it kicked off the price war, Tesla
sent emails to its direct suppliers,
encouraging them to lower costs by 10%
this year, according to a person with direct
knowledge of the matter.
And in June, a group of small suppliers
wrote to state-owned Changan Automobile
to push back against 10% price reductions.
The EV battery market has also turned,
with suppliers cutting prices for
automakers. CATL, which counts Tesla as its
biggest client, offered smaller domestic EV
makers discounted batteries in February.
Lithium iron phosphate (LFP) batteries,
the type used by Tesla in China, were 21%
cheaper in August than five months ago,
while nickel-cobalt batteries were 9% to
18% cheaper, RealLi Research data show.
When Chen Yudong, head of Bosch’s China
operations, visited one of his biggest
customers in March, he received an
unusual present, a chopping knife with
a message engraved on its sheath: “Cut
decisively through the mess.”
Three months later, he told Reuters that
price cuts had been more aggressive in
2023 than in previous years. “They’ve
been keeping me awake at night.”
September
2023
54