At the beginning of the year, Tesla's &#34;price war&#34; on new energy vehicles ignited the already fiercely competitive Chinese electric car market. The emerging car manufacturer, Weilai, began to struggle for survival, and &#34;how to reduce costs and increase efficiency&#34; became the theme for car companies throughout the year.
On the afternoon of November 3rd, Li Bin, the founder, chairman, and CEO of Weilai, released an internal memo titled &#34;Organizational Optimization and Two-Year Priorities&#34; (referred to as the &#34;memo&#34; below) in response to rumors of layoffs.
In the memo, Li Bin stated that according to the company's organizational and business optimization plan, the company will reduce about 10% of its positions, and the specific adjustments will be completed in November. Earlier reports stated that Weilai would initiate layoffs, with departmental proportions ranging from 10% to 20%.
Li Bin mentioned that Weilai will carry out adjustments related to organization and resource allocation, stating that in order to qualify for the finals, it is necessary to further improve execution efficiency and ensure sufficient resource allocation for key businesses. &#34;Improving efficiency&#34; includes both organizational efficiency and resource efficiency.
Organizational efficiency involves merging redundant departments and positions, transforming inefficient internal workflows and divisions of labor, and eliminating inefficient positions; resource efficiency involves delaying and reducing investments in projects that cannot improve the company's financial performance within three years.
On November 1st, car companies disclosed their sales figures for October, and Weilai's performance was not impressive. Ideal Auto has sold over 40,000 vehicles per month; Xiaopeng Motors, which used to be at the bottom, has turned the tide and exceeded the 20,000 mark, setting a new record for monthly deliveries; Weilai delivered 16,000 vehicles in October, an MoM growth of 2.77%, still falling short of the 20,000 mark.
Wall Street News previously analyzed that Weilai has ambitious plans, and the wide range of business lines has made it the company with the most employees among emerging car manufacturers. According to the financial report, as of the end of last year, Weilai had a total of 27,000 employees. In comparison, Ideal Auto had 19,000 employees, and Xiaopeng Motors had 16,000.
The continuous financial losses have also put Weilai in a difficult situation. From the financial report of the second quarter of this year, Weilai's net losses are still expanding, reaching 6.056 billion yuan, a YoY increase of 119.6% and an MoM increase of 27.8%; the gross profit margin has not yet turned negative, but it is still declining, with a YoY decrease of 12 percentage points.
According to statistics, from 2016 to the first half of this year, in a span of 7 years, Weilai's cumulative net losses reached 63.082 billion yuan.
After the news of layoffs came out, Weilai's stock price rose more than 2% in pre-market trading.
Is it a common phenomenon for car companies to &#34;reduce costs and increase efficiency&#34;?
According to media analysis, it has become a common phenomenon for car companies to &#34;reduce costs and increase efficiency&#34;.
The &#34;price war&#34; among car companies can be traced back to the second half of 2022. In order to cope with the rapid encroachment of new energy vehicles on the market share of traditional fuel vehicles, strong traditional brands such as Toyota and Volkswagen have started to &#34;lower prices and promote sales&#34; of their fuel products.
However, in January of this year, new energy vehicle companies such as Tesla launched a counterattack and started a new round of price wars. Since then, almost every month, car companies have announced policy adjustments and price reductions, and the &#34;price war&#34; has intensified. But the price war has brought cost pressure to the entire automotive industry chain.
Recently, on a professional social platform, a netizen claiming to be an employee of Gaohe Automobile revealed that Gaohe Automobile has initiated a large-scale layoff. The layoff ratio this time is as high as 20%, and some departments have a layoff ratio of up to 50%. At the same time, informed sources said that each department of Gaohe Automobile has set targets for this layoff, and the proportions vary. &#34;Project teams and personnel with no results and low performance are the main targets of the layoff.&#34;
In response to this, Gaohe Automobile stated that the recent restructuring of the company's business structure, the merger, reorganization, and establishment of some job functions, combined with performance-based elimination, have led to personnel changes, which are routine management work. At the same time, a large number of positions are still being recruited, and all business operations are proceeding as usual. &#34;There are some false rumors, and the so-called large-scale layoffs do not exist. Various data proportions are just rumors.&#34; Gaohe Automobile said.
Although Gaohe Automobile denies &#34;large-scale layoffs&#34;, industry insiders believe that Gaohe Automobile's streamlining of operating costs through the merger, reorganization, and establishment of some job functions is a response to the obvious pressure in the terminal market.

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Li Bin believes that the next two years will be the most competitive period of transformation in the automotive industry. During this time, there will be a focus on improving organizational efficiency and resource utilization. On one hand, inefficient positions will be eliminated, and on the other hand, investments in projects that cannot improve financial performance within the next three years will be postponed or reduced.

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NIO Inc. USD OV

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"Cost reduction and efficiency improvement" has reached the new energy vehicle industry? Li Bin of NIO: The company will reduce about 10% of its workforce.