Li Auto Recalls Staff Amid Layoffs Impacting R&D and Testing

Li Auto recently initiated a large-scale layoff. However, insiders from Li Auto‘s R&D department have revealed that some of the laid-off employees have been notified of a recall. Those who were previously negotiated for compensation have not yet received their payments, and this compensation will not be provided to the recalled employees. The contracts of the involved employees will be extended, but the scale and departmental proportions of the recall remain unclear so far.

According to Jiemian, a Chinese media outlet, several insiders from Li Auto stated that they had heard rumors of modifications after the failure of MEGA and the slowdown of pure electric vehicles’ production, but no specific plans have been made yet. In this context, key departments involved in product evolution, such as R&D and testing, have become the main force. Employees from Li Auto‘s intelligent driving department, who were affected by the layoffs, have stated that this round of personnel adjustments has greatly impacted the internal R&D and testing departments, almost halting development and relying on a few low-cost external teams for testing assistance.

After the May Day holiday, Li Auto attempted to reduce costs and increase efficiency through direct layoffs. It is reported that the overall layoff ratio exceeds 18%, affecting more than 5,600 employees. Among them, more than 400 people were cut from the sales and service operations department, the recruitment department was reduced from over 200 people to 40 to 50, and the intelligent driving team was downsized to under 1,000. Due to the large number of layoffs, some media reported that Li Auto had anticipated strong reactions from employees and subsequently strengthened security measures at the headquarters. Even those driving pre-registered vehicles into Li Auto‘s headquarters had to re-verify their employment status.

The ongoing layoffs are related to Li Auto‘s aggressive expansion goals. At the beginning of 2024, Li Auto set a sales target of 800,000 units and planned to release three more M-series pure electric products after the MEGA launch. To meet sales targets and product release schedules, Li Auto actively recruited talent. According to Jiemian, Li Auto hired over 16,000 new employees last year, a 60% increase from the previous year.

However, the failure of MEGA, the first high-end pure electric model, both in public opinion and sales, led to a sharp downturn in momentum, prompting the company to choose layoffs to save costs. Li Auto‘s CFO, Li Tie, stated in a first-quarter conference call that the second quarter would be the most difficult period for the company this year.

Li Auto still has nearly 100 billion yuan in cash reserves, which provides breathing room to correct mistakes. In fact, facing the fiercely competitive industry landscape, even leading companies are actively responding. Tesla previously carried out layoffs globally, and BYD is implementing a stricter performance management plan.

Li Auto is not the only car company to recall laid-off employees, though. During the layoff process, the importance of different departments in dealing with the current crisis emerged, and automakers may selectively recall employees to meet challenges.Two weeks after Tesla laid off its supercharging team, Elon Musk decided to recall some employees, citing a halt in the operation of supercharging stations and construction of new sites.

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