Tesla has began cutting staff at its plant in Shanghai. Credit: Nadezda Murmakova.

Tesla is cutting some of its electric vehicle (EV) battery staff at its Shanghai plant, people familiar with the situation have said, according to Bloomberg.

The EV maker told workers they could transfer to another workshop to swap to tasks such as painting, stamping or general assembly, Bloomberg reported.

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Tesla‘s Gigafactory in Shanghai, is the company’s most productive plant responsible for manufacturing of over half of the company’s global output. 

The factory is capable of producing up to one million EVs annually and employs around 20,000 workers.

Tesla has a unique production line as its batteries must be built into battery modules and packs, prior to their installation into the car, with the majority of this process taking place at Tesla’s battery workshop.

Founder and CEO, Elon Musk, has relied on China for Tesla’s EV battery production line, but as US companies diversify away from the Chinese supply chain, Tesla has looked to set up manufacturing elsewhere.

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During Indian Prime Minister Narendra Modi’s trip to the US, Musk told him that Tesla will open operations in India “as soon as humanly possible”, adding that he was “trying to figure out the right timing” to make it happen.

The layoffs come at a time when Tesla’s deliveries from its Shanghai factory have increased.

Despite the competitive EV market in China, Tesla’s vehicle deliveries form Shanghai have risen by almost 20% from the previous year: in June 2023, the factory delivered 93,680 vehicles and Tesla’s overall deliveries worldwide hit a record high in the second quarter, Bloomberg reported.

However, due rising demand in the US and China, Musk chose to cut prices throughout the first quarter of 2023, during which Tesla’s operating margin dropped to its roughly its lowest in two years, according to Bloomberg.