TESLA is laying off some battery production workers at its Shanghai plant, people familiar with the matter said, amid a bruising price war in China that’s seen manufacturers across the board heavily discount cars.

The US electric carmaker began notifying some employees on the cell assembly lines of the first phase of its factory in China’s financial heart earlier this week, the people said, asking not to be identified because they’re not authorised to speak publicly.

Some staff have been given the option to transfer to another workshop such as stamping, painting or general assembly, the people said. It’s not clear how many battery workers may be let go, or the specific reasons behind the layoffs.

Representatives for Tesla in China didn’t respond to a request for comment.

Around 20,000 staff are employed at Tesla’s Shanghai factory, which has the capacity to churn out about 1 million cars a year.

While Tesla uses batteries made by LG Energy Solution and Contemporary Amperex Technology in its cars, the cells have to be built into battery modules and packs before they’re installed in a vehicle. Much of that part of the process is done at Tesla’s battery workshop.

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Some automation equipment that could help to replace human labour on the battery production line is in the design and construction phase, one of the people said.

Austin, Texas-based Tesla is on a tear at the moment, both in China and abroad.

Deliveries from Shanghai rose almost 20 per cent from a year earlier in June to 93,680 vehicles, one sign the disarray caused by the price war may be abating.

The company also delivered a record number of cars globally in the second quarter, the 466,140 figure beating Wall Street estimates.

Tesla’s operating margin shrank to 11.4 per cent in the first quarter, a roughly two-year low, after it marked down its electric vehicles (EVs) in January and March. CEO Elon Musk has done several more rounds of price cuts and said he’s comfortable making less money on each car sold.

Earlier this week, Tesla, along with a handful of other automakers in China, pledged to maintain fair competition and avoid “abnormal pricing” in the world’s biggest EV market. BLOOMBERG