Tesla Takes Legal Action Against Chinese News Outlet Over Report Of 'Sweatshop' Conditions At Shanghai Gigafactory: Global Times

Tesla Model Y

Tesla Inc TSLA is taking legal action againt a Chinese tech media outlet called PingWest that earlier reported of harsh working conditions and quality control problem at Tesla's Shanghai Gigafactory.

What Happened: Tesla reportedly has sent an "indictment" and other legal notices to PingWest over a report the outlet published on Dec. 25. 

The report, published in Chinese and English, claimed that workers toil under "sweatshop" conditions at the Shanghai factory, and that the company was cutting corners on quality to speed up production. Unnamed workers describe the plant is being low-tech and high-pressure, with bosses who are overly demanding — in other words, like a stereotypical Chinese factory.

"PingWest has found that the insanely high production volume has not been the direct result of the technological advancement that Tesla is known for, but rather the same old high-intensity manual labor that still plagues many industries inside China," PingWest reported.

"Workers who spoke to PingWest said that in reality, Tesla's Shanghai factory was not much different from other automotive plants they've worked at."

Today, the Global Times, a Chinese Communist Party-controlled tabloid, reports that Tesla sent PingWest an "indictment, a notice of responding to prosecution, as well as other affidavit." Global Times cites a statement issued today by PingWest, formally known as Beijing PingWest Interact Technology Co.

PingWest has until Feb. 8 to respond and says it will "actively cooperate" with Tesla's lawsuit, Global Times reported.

Words Followed By Action: Tesla earlier had threated this legal action. Tao Lin, Tesla China's vice president for external affairs, called the PingWest report "outrageous" as soon as it came out and promised legal action would follow, according to CX Tech, a branch of the business publication Caixin. 

CX Tech also reported that the spat has led to rumors swirling online in China: "Some internet users [suggest] that He Xiaopeng, CEO of Tesla’s domestic rival Xpeng, holds a stake in the media outlet, an allegation denied by PingWest."

Why It Matters: China is a hugely important market for Tesla and partly why the stock price skyrocketed more than 700% in 2020.

Wedbush Securities analyst Daniel Ives predicted in November that 40% of Tesla sales could come from China by 2022.

And orders for the company's Model Y, produced in Shanghai, reportedly ate up the full first quarter's worth of supply within days, just after opening up a web page for orders at the start of the year.

Photo courtesy of Tesla.