Elon Musk and Tesla Are in a Bad Spot

Chinese employees of the American electric vehicle manufacturer took to social media this weekend to protest against the reduction of their bonuses.

It is bad publicity, even when your name is Tesla. 

The American electric vehicle manufacturer has often managed to avoid ending up in an image crisis. Most often, Tesla is associated with the traits attached to a prestigious brand combining almost all the labels: reliability, safety, innovation, luxury, icon and a good place to work.

Elon Musk, who wants to be considered the biggest innovator of our time, wants these labels to help define this narrative, because he is identified with Tesla. Basically, a bad image or publicity of Tesla has an impact on the image of the techno king.

Musk is therefore committed that Tesla  (TSLA) - Get Free Report retain its pristine reputation and remain on its pedestal. A mini scandal triggered this weekend in China, Tesla's second largest market, is however likely to slightly tarnish this image.

Safety Incident

Chinese employees of the electric vehicle manufacturer have taken to social media to protest against the reduction of their bonuses. They asked Musk to intervene.

"Please pay attention to the performance of frontline workers at Tesla's Shanghai factory being arbitrarily deducted," a user tweeted at Musk and Tesla Asia on Apr. 14.

"Please pay attention to the performance of GIGA Shanghai factory workers being arbitrarily deducted @elonmusk," another Twitter user posted the following day.

Employees say that the reason given by local management is that the bonus reduction is due to a safety incident in which an employee died at the factory in February. Reuters, which first reported on the unprecedented protest, said it interviewed employees from Tesla's Shanghai factory who said their managers told them that their performance bonuses were impacted by the safety incident.

According to a report by local authorities circulating on social networks, a mechanical incident occurred on Feb. 4 at the Tesla factory in Shanghai, which employs 20,000 people. An employee died. The authorities attributed the responsibility for the accident to the employee.

Musk reacted on Apr. 17, saying that he had been alerted and was looking into the situation. He made no further comments.

"Was alerted this weekend. Looking into it,” the CEO said on Twitter on Apr. 17, commenting on a link about the protest.

Price War in China

Tesla didn't immediately respond to a request for comment. But the company will publish its first quarter earnings this Wednesday, and might provide an update about Shanghai.

The drop in bonuses in Shanghai comes as Tesla has launched a price war in the country, by drastically lowering the prices of its cars - popular models Model 3 and Model Y in particular.

Experts fear that this price cut, also carried out in the United States, will eat into the group's profit margins.

In August 2021, Tesla posted job openings for Giga Shanghai via Weibo. The company was looking for quality inspectors, production operators, and logistics operators. Tesla was offering a base salary starting at 5,341 yuan ($776) and an annual income of 110,000 yuan to 120,000 yuan (almost $16,000 to $17,450), including 36 hours of overtime per month and a target performance bonus.

These salaries are equivalent to those offered by Chinese car manufacturers and other multinationals present in the region.

The Shanghai plant, which produces the company's two most popular models — the Model 3 and the Model Y — serves the Asian and European markets. Giga Shanghai has a production capacity of more than 750,000 vehicles per year, according to the company.

China is an important market for Tesla. It is its second largest market in terms of sales. Musk was reportedly in China on Easter weekend with Tom Zhu, the former head of China operations, who was promoted to head of production operations at Tesla last year. Zhu is now the company's manufacturing leader. This promotion makes him one of the potential successors to Musk as CEO.

Last week, Tesla announced it will build a second plant in Shanghai for the production of its Megapack energy storage system. The American automaker will start building this new plant in the third quarter of this year, with the ambition of starting production in the second quarter of 2024.