Tesla Fires China Staff as Sales Falter

Layoffs reportedly began before the Chinese New Year holidays, and they are affecting more than just the sales staff, which apparently has been reduced by half. A report at Chinese website CarNewsChina.com indicates layoffs have occurred in the tech support and procurement departments, as well as marketing, public relations, legal, administrative and marketing systems. Before the firings, Tesla reportedly had 600 employees in China.

In January of this year, Tesla China sold just 120 cars, according to a report at CarNewsChina.com. Reuters reported in February that Tesla CEO Elon Musk “threatened to fire or demote country managers” unless sales picked up. Musk had already noted weak sales in China in a letter to shareholders when the company reported fourth-quarter 2014 results.

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The issue is not so much that there are no buyers, but that Tesla has managed to step on its own toes, as well as those of its potential customers. When the company introduced the P85D version of the Model S sedan last October, previous orders for the Model S were cancelled and new orders placed for the new version.

To combat the order cancellations, Tesla raised its order deposit fee of 15,000 yuan (about $2,400) to 50,000 yuan. A second deposit of 250,000 yuan was required when the car was ready to be shipped to China. The Model S costs 648,000 yuan in China (about $103,400).

Chinese buyers balked at the higher fees, as the company’s China office had predicted they would, and orders appear to have dried up. Other reasons for the lack of sales include overly optimistic sales forecasts and shipments of cars from the United States for stores that never opened.

Chinese management suggested selling the cars at 20% discount and using third-party sellers to unload the inventory. Tesla headquarters apparently rejected both suggestions out of hand.