By ZHOU Shuqi

State-owned automaker SAIC Group has plans to impose a mass pay cut on its workforce backed up with widespread layoffs, persons familiar with the matter have told Jiemian News.

One plan is to cut senior executives’ salaries by 20 percent, managers by 15 percent, and the other staff by 10 percent. Details are still being discussed. The source said SAIC plans, initially at least, to reduce the salary bill by laying off large numbers of staff, focusing on those over 45 years old.

In response to Jiemian News’ inquiry, a SAIC Group representative was forthright in denial, having “never heard of any plan of cut salaries nor for mass layoffs.”

In its 2022 financial report, the group’s net profit had sunk to a five-year low. Sales in 2022 dropped for the fourth year in a row.

To make matters worse, the automobile market in China is in turmoil. A price war that began in the EV market when Tesla slashed prices last year, has infected the ICE market and deflated the second-hand market almost entirely.

In the first three months of this year, SAIC Group’s sales dropped 26 percent year on year to 890,000 units. The company’s annual sales goal is 6 million units, one that quite obviously demands 1.5 million sales per quarter. On the basis of its Q1 performance, there is very little chance of the group hitting that goal.

SAIC Volkswagen and SAIC-GM used to be the pillars of the company’s income, but both saw sales on the way down last year. It’s not entirely clear why, but JVs have been particularly badly affected by the price war.

The Chinese side of these JVs doesn’t usually have much of a say in strategic decisions. The foreign part of the company makes decisions regarding the distribution of resources.

The slow-moving JVs then have no flexibility and have to make the best of whatever deal they find themselves on the end of. They have almost no chance of competing with domestic EV startups prepared (and able) to do almost anything – including eccentric or unorthodox strategies – to get ahead and stay ahead of the field.

SAIC is aware of the problem and claims to be developing its own EV marques, but has been very slow out of the blocks. Cars have been made, which is a good start, but precious few automobiles have left the showrooms.

SAIC founded Rising Auto in 2021 and started IM Motors with e-commerce giant Alibaba and state-owned technology heavyweight Zhangjiang Hi-Tech. But neither has done well enough to raise eyebrows in the market, let alone raise money for SAIC.

The flagship of IM Motors and the makers’ second vehicle is the LS7, a mid-to-large-size luxury SUV. A pre-sale price starting at 350,000 (US$50,000) was announced last year. Shortly after the launch, IM announced more than 3,000 pre-orders in one hour. When the LS7 actually went on sale in February only about 1,000 units were shipped.

The Rising Auto R7 is a fully-electric mid-size luxury crossover SUV which, if anything, has managed an even worse performance than the LS7, with fewer than 200 monthly shipments.