The domestic automobile industry has reached a freezing point, and automakers are struggling to survive by cutting salaries

In 2019, domestic automobile sales declined significantly. According to data released by the China Association of Automobile Manufacturers, domestic automobile production and sales in 2019 reached 25.721 million and 25.769 million respectively, down 7.5% and 8.2% year-on-year respectively.

In 2018, domestic automobile production and sales reached 27.809 million and 28.081 million respectively, but production and sales fell by 4.2% and 2.8% respectively compared with the same period of the previous year. Two consecutive years of declining sales have left the domestic auto market cold. Many automakers believe that after surviving the most difficult year of 2019, 2020 will be better. But the COVID-19 pandemic has shattered all good wishes.

The outbreak has put the country into a semi-closed state. Auto companies in Hubei and even the whole country are all shut down, and 4S stores are deserted - the auto market has hit rock bottom. Automakers have to bear high factory operation and maintenance and personnel costs. For example, Beijing Benz revealed that it lost 400 million yuan a day when the factory was shut down. Sales have continued to decline for two consecutive months, and China's auto industry has reached a freezing point.

In January 2020, China's automobile industry produced 1.783 million vehicles, a year-on-year decrease of 24.6%, and sold 1.941 million vehicles, a year-on-year decrease of 18%. In February, domestic automobile production and sales were 285,000 and 310,000 respectively, down 83.9% month-on-month, and down 79.8% and 79.1% year-on-year respectively.

The entire auto market continues to decline, and the situation of automakers has become even more difficult. Changan Automobile  sold 1,759,971 vehicles in 2019, a year-on-year decrease of 15.16%; BAIC Group sold 2.26 million vehicles in the whole year, a year-on-year decrease of 5.91%; GAC Group sold a total of 2.0622 million vehicles, a year-on-year decrease of 4%. After 2020, the situation has become more serious.

According to the production and sales report released by SAIC Group, SAIC Group sold 47,365 vehicles in February 2020, and 447,573 vehicles this year, a year-on-year decrease of 54.07%. In addition, BYD sold 5,501 vehicles in February 2020, and 30,674 vehicles from January to February, a year-on-year decrease of 56.65%. Under this circumstance, car companies are beginning to sit still and have chosen to cut wages to reduce costs. Judging from the situation of salary cuts, the impact of this wave of salary cuts is very wide. From central enterprises to local state-owned enterprises to private enterprises and new car companies, they have begun to cut wages to save themselves.

Central enterprises such as Changan Automobile have already started to adjust their salaries. Changan has made some adjustments to salaries after the epidemic, strengthening the binding of employee salaries to performance such as sales. If performance cannot be achieved, it will affect salaries. State-owned enterprises in Beijing, Shanghai and Guangzhou are also making salary adjustments. Among all companies, SAIC Group has made the most resolute salary adjustments. Many of its subsidiaries such as SAIC Maxus, SAIC Huiya, SAIC-GM-Pan Asia, SAIC Passenger Vehicle Group, and even SAIC Volkswagen and SAIC-GM have made decisions to cut salaries.

There have also been rumors that BAIC Group will be making salary adjustments. According to a document, employees in the sales department of BAIC Group will receive their salaries based on the amount of tasks completed. Employees who fail to complete the overall wholesale tasks in March will have 20% to 70% of their overall monthly salary deducted.

Private enterprises were not spared and have also made adjustments to their salaries. Employees of BYD reportedly canceled their performance and overtime pay for February. Jiangling Holdings announced that the income of executive vice presidents and above would be reduced by 40%, and the income of vice presidents and below would be reduced by 30%. For those who provide normal labor during the suspension of production and work, Jiangling Holdings will pay corresponding income subsidies. The additional income ratio for positions such as assistant to the president, middle-level executives, middle-level deputies, and ordinary employees will be between 10% and 20%.

In addition, the situation of new car companies, which are already in a precarious situation, is also very bad. On March 5, WM Motor announced that it would cancel the year-end bonus for employees and postpone the payment of 13th salary. Aiways reduced the salary of employees without notice when it was paid, and the year-end bonus has not yet been paid.

At present, the impact of this epidemic on domestic automobile companies is still very large, affecting automobile companies from all angles of the industrial chain. When products cannot be sold in time, automobile companies have to cut salaries to save themselves. Even central enterprises and large local state-owned enterprises can't stand it.

Insiders of SAIC Group revealed that the salary reduction documents and contents circulated on the Internet are basically true, and the entire SAIC Group is carrying out salary reductions to varying degrees. This is also the first independent car company to make a salary reduction notice, but soon there was news that SAIC Passenger Vehicle Group held an emergency meeting and verbally notified the passenger car company of the salary adjustment arrangements, which roughly include: 1. The performance salary of senior managers and below will be reduced by 75%, and all senior managers and above will be reduced; 2. The reduction period is from March to June, and will be determined later depending on the company's operating conditions; 3. Performance bonuses are strongly related to the company's operating conditions; 4. Car subsidies for working from home and quarantine observation will be deducted on a daily basis.

It is understood that the 75% reduction in performance wages of SAIC Passenger Vehicle Group is equivalent to a 15% reduction in overall wages. SAIC Group is not the only one to make a salary cut decision. According to public reports, on March 10, BAIC Group implemented a new sales assessment plan internally. According to the plan, the deputy general manager in charge of the retail center, the deputy general manager in charge of the sales department, the regional manager, other relevant personnel in the back office of the business unit, and all sales department staff will receive their wages based on the amount of tasks completed. Employees who fail to complete the overall wholesale task in March will have their monthly overall wages deducted by 20% to 70%.

At present, the impact of the epidemic on the domestic auto market has not disappeared, and the sales forecast for March will not be too optimistic. Some employees complained that this was a disguised salary cut. Although another local automaker has not cut salaries for the time being, according to GAC employees, a considerable part of their income comes from the year-end bonus (6 to 10 months' salary) at the end of the year. Therefore, if the overall situation of the company is not good at the end of the year, it may also affect performance income. There are also reports that BYD has cancelled performance and overtime pay in February. BYD's performance salary accounts for 33% of the basic salary.

Jiangling Holdings also announced news of production suspension and salary cuts. This was due to the fact that parts suppliers in the Hubei epidemic area had not resumed work, especially the first- and second-tier parts suppliers around the Wuhan urban circle, whose resumption time had not yet been determined. Jiangling Holdings decided to temporarily suspend work.

Jiangling Holdings also issued a salary reduction notice, with the income of executive vice presidents and above reduced by 40%, and the income of vice presidents and below reduced by 30%; and for those who provide normal labor during the production and work suspension period, Jiangling Holdings will pay corresponding income subsidies, and the additional income ratio for positions such as assistant to the president, middle-level full-time positions, middle-level deputy positions, and ordinary employees will be between 10% and 20%.

The best-selling NIO has only sold 20,000 units, and WM Motor is already the second best-selling car company among all new car companies. It has always been difficult for NIO. The epidemic has forced them to further reduce costs and increase efficiency. When releasing the fourth quarter financial report of 2019, Li Bin said that NIO now has less than 7,000 employees and will cut costs this year to achieve the goal of turning gross profit margin positive.

At the end of 2019, NIO revealed that it had about 7,500 employees. Now it seems that after the epidemic, hundreds of people have been removed to further control costs. The company has been carrying out cost control and improving capital efficiency since 2019. At that time, some poorly performing personnel had been optimized and eliminated, and benefits such as holiday gifts had also been cancelled.

Compared with traditional car companies, new car companies are currently under greater pressure. Many new car companies do not have much car sales and do not have the ability to generate revenue on their own. In addition, the current environment is difficult and investment institutions are cautious about investing. Even if they invest, they will give priority to new car companies that have made achievements. If the impact of the epidemic does not disappear quickly, many new car companies may not survive this spring.

Judging from the current companies that have cut salaries, the salary reduction measures taken by these companies are also different. SAIC Passenger Vehicle Group, SAIC Maxus, BYD, SAIC-GM-Pan Asia and other companies have chosen to cancel or reduce performance bonuses. These companies have basically retained the basic salary of employees, but have made discounts on performance bonuses, which is a disguised salary cut. Shanghai Huizhong, BAIC Group, Jiangling Holdings, SAIC Volkswagen, Ai Chi and other companies have directly adjusted the basic salary of employees. These companies are more determined to cut salaries. Companies such as WM Motor and Ai Chi also directly canceled employees' year-end bonuses last year, and Bojun Company required employees to pay their own social security, which also affected the actual wages of employees.