Slow Sales Are Responsible For Tesla’s Job Cuts In China According To Reports

Tesla’s report that it is cutting jobs in China illustrates the electric-car pioneer’s struggles for success in the country, which is considered an important market for the developing technology.

The Chinese newspaper Economic Observer reported that Tesla will eliminate 180 of the 600 positions at its China unit because the company’s sales have failed to meet expectations. However, the electric-car maker, led by billionaire Elon Musk, didn’t indicate the extent of the cuts. Gary Tao, a local spokesperson for Tesla, simply said that the company will eliminate some positions as it makes structural changes to its business in China.

“The purpose is to better respond to the Chinese Market,” Tao said. “The team remains stable and strong.”

Tao indicated that the current personnel changes started at the beginning of the year, but declined to provide any additional details. Meanwhile, the Economic Observer reported that Tesla’s local sales department will cut half of its workforce, along with other cuts to its marketing, public relations and administrative divisions. The company declined to comment on the Chinese media reports.

In January, Musk stated that sales in China have been slow due to consumer concerns over the charging of electric vehicles. The fact that the vast majority of China’s urban population lives in multi-family, low-rise housing complicates the installation of home charging stations. But is this the entirety of the problem? It seems that Tesla also faces corporate challenges, as several Tesla China executives left the company last year, including former president Veronica Wu and former vice president of communications June Jin.

The news of Tesla’s cuts comes at the same time as China struggles to meet its own goal of reducing its dependency on imported oil by promoting alternative-energy vehicles, including cars and buses. The country wants to have half a million such vehicles on the road by the end of this year and 10 times that number by the end of the decade. However, only approximately 50,000 cars out of 20 million passenger vehicles that were sold in China last year met that goal.

Overall, it appears that the combination of a lack of public charging infrastructure along with the scarcity of residential garages to install home charging stations has prevented Tesla’s vehicles from becoming a popular choice for Chinese car buyers. Despite subsidies from China’s central and local governments and exemptions in some cities from stringent license-plate restrictions, analysts say that many Chinese consumers consider electric-cars comparatively expensive and raise concerns over having easy access to charging stations.

Recent data suggests that sales haven’t substantially improved in the beginning of 2015. According to analysis by research firm JL Warren, 469 Tesla cars were registered in China in January, up only 6 percent from December’s 442 and on par with November’s 471 cars. Additionally, the research firm indicates that Tesla imported only 10 Model S cars into China in January, marking a sharp decline from the more than 440 brought into China the previous month. Tesla declined to comment on these figures.

It’s difficult to know how this will play out in the future. Yale Zhang, managing director of research company Automotive Foresight, says that Chinese buyers of Tesla will interpret the recent job cuts as a sign that “there is something wrong” with the company. Zhang feels that in China, the brand’s strength was based on a media-created bubble centered around the charisma of Elon Musk. “Now that bubble has burst,” he said.

Meanwhile, Tesla remains publicly unfazed, saying that the company is “on the right track and confident” about the market in China.