(Yicai) May 28 -- FAW-Volkswagen Automotive, the carmaking joint venture between China’s FAW Group and Germany’s Volkswagen, plans to downsize the staff at its factory in Foshan.

FAW-Volkswagen’s Foshan plant will not renew the contracts of the 565 lower-performance workers of the 690 who joined the plant in July 2019 and whose labor contracts will expire in July, according to an online document obtained by Yicai. The plant will halt production for half a month to complete the staff adjustments.

An insider from the JV later confirmed to Yicai that the factory in Foshan will not renew the contracts of some workers. FAW-Volkswagen has already informed the local government about the plan and agreed to pay timely compensations to the workers involved and help them find new jobs, the person added.

However, the insider told Yicai that the downsizing would not affect the plant’s daily production and operation.

The Foshan plant, located in China’s southern Guangdong province, has an annual production capacity of 600,000 units. It mainly manufactures the Volkswagen Golf, Audi Q2 and Q4 e-tron, and Volkswagen ID.4 Crozz, ID.6 Crozz, and ID.7 Vizzion.

FAW-Volkswagen has been facing great pressure because of the fierce competition in China’s automotive industry brought about by the electrification transition. The sales gap between FAW-Volkswagen and BYD has widened since the Chinese new energy vehicle giant’s sales surpassed those of the JV in 2022.

In the first four months of the year, FAW-Volkswagen sold about 514,000 cars, compared with BYD’s 840,000 units, according to statistics from the China Passenger Car Association.

JVs between Chinese and overseas carmakers in China are facing difficulties because of their slow electrification transition, so they must undergo big changes if they wish to survive, said Xu Changming, senior economist at the State Information Center.

Foreign brands still have opportunities to seize in the fast-growing electric vehicle market in the long term, mainly thanks to their ability to cope with price wars in China and expectations by their customers for NEVs, Xu noted. However, they must be willing to sacrifice profits to maintain their market share in the short term, he added.

FAW-Volkswagen is not the only Chinese carmaking JV to cut employees. GAC Honda Automobile’s staff claimed that in the middle of this month, the JV between GAC Group and Honda Motor launched a new lay-off plan to let go more than 1,000 workers.

Editors: Tang Shihua, Futura Costaglione