Summary of the Core Content
Xingyu Co., Ltd., a leading domestic automotive lighting company, recruited 440 fresh graduates for the 2026 intake in the fall of 2025, promising them technical positions upon employment. However, just over a month into their new roles, the domestic automotive market experienced a sharp decline in orders, forcing all new employees to make a difficult choice: either sign an agreement stating they resigned for personal reasons and receive half a month's salary as compensation, or be transferred to work on the assembly line, with their internship period extended from one month to over three months. In the end, nearly 300 out of the 440 recruits were forced to leave, leaving less than 160 employees on the job. Initially, this clear case of breach of contract was merely classified by the local labor bureau as having "rude communication methods" and was not even considered a legal violation. It was only the company's ongoing Hong Kong IPO process and the compliance investigations by major clients such as Volkswagen and Mercedes-Benz that pressured the company's management to publicly apologize. Essentially, this is a typical example of the automotive supply chain treating fresh graduates as a flexible labor reserve that can be used and discarded at will, with the cost of breach being so low as to be virtually negligible.
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Analysis of the Incident from Five Different Perspectives
1. This action is not a last resort due to poor performance; it's more like treating fresh graduates as "takeout orders that can be canceled at any time"
Many people thought that Xingyu was in financial distress and had to lay off employees, but that's not the case. The company's approach to hiring has long changed. It once had over 10,000 permanent employees but cut nearly 3,000 in 2025, reducing production staff by 40%, and filled the gap with contractors and temporary workers. The company divides its workforce into two categories: permanent employees, who are like "homeowners" with long-term contracts and high termination costs; and contractors and temporary workers, who are more like "renters"—hired when orders are high and dismissed when they are low, with only a small deposit as compensation. The fresh graduates recruited this time are even more disposable, akin to ordering takeout: there was no real need for these positions, and the company was betting on an increase in orders from car manufacturers. If orders fell, they were simply dismissed with a compensation of 15,000 yuan. Xingyu's recruitment of 440 new employees was not due to a real shortage of staff; rather, it saw these graduates as an option without any contractual obligations, to be used when business was good and discarded when it was bad, without considering the graduates' losses. These students missed the prime time for job hunting, lost their status as fresh graduates after just one month of employment, and were disqualified from applying for positions in government agencies and public institutions that only hire fresh graduates. Their short 40-day work experience on their resumes made them appear unstable to potential employers.
2. The reason isn't a lack of funds for proper compensation; the cost of breach is so low that it's almost a profit
Let's do the math: Xingyu earned 1.6 billion yuan in 2025 and had 3.6 billion yuan in cash on hand. In the past three years, it received 451 million yuan in government employment support and research subsidies, and was even awarded the title of "Advanced Private Enterprise in Employment." Yet, the cost of hiring one new graduate was only 15,000 yuan, which is less than what one of its regular employees earns in 25 days. In contrast, XPeng only paid 5,000 yuan for breaching a contract with a graduate in 2022. Although the compensation has doubled, with 12.7 million graduates seeking jobs this year, the company has no trouble finding new employees. Even if it pays 15,000 yuan, it saves more than the 7,000 yuan it would have to pay these unused technical employees each month. Ironically, the local labor bureau's report only mentioned "rude communication methods" and did not classify it as a legal breach, so the company didn't have to pay any fines. The cost of breach is so low that it's less than the loss from stopping production for an hour.
3. The current hiring logic in the automotive industry has shifted to burdening workers with market fluctuations
This issue is not unique to Xingyu; it reflects a change in the entire domestic automotive supply chain's approach. In the first half of 2026, domestic car sales plummeted by 24%, with nearly a quarter of cars not being sold, and the industry relies heavily on exports. Car manufacturers can cut orders at any time, and supply chain companies dare not retain too many permanent employees. Xingyu's use of contractors has increased by 4.6 times in four years, with the proportion of temporary workers exceeding the legal limit of 10%. All costs must adapt to order fluctuations, and no one wants to keep "idle" employees. When orders are high, temporary workers are hired; when they are low, new recruits are dismissed. The risks of market changes are borne by the most vulnerable group: fresh graduates.
4. What forced the company to apologize was not regulation, but its own financial constraints
Many wonder why the company didn't apologize immediately after the labor bureau's report. It was the compliance requirements of major clients, such as Volkswagen and Mercedes-Benz, that pressured it. These companies strictly monitor labor rights in their supply chains, and a breach could result in them removing Xingyu from their supplier list, costing the company billions in orders. Xingyu is also in the midst of its Hong Kong IPO process, hoping to raise billions. Its prospectus claims to be "people-oriented with employees as its core asset," but the scandal forced it to apologize. If the IPO fails, the loss would be much greater than the 15,000 yuan in compensation. Additionally, the local labor bureau's mild penalty (a mere reprimand) meant the company didn't have to pay any fines.
5. This incident serves as a wake-up call for all fresh graduates
The concept of securing a job through campus recruitment no longer guarantees stability. With 12.7 million graduates seeking jobs and a surplus of supply, companies can treat these recruits as disposable resources. When business is good, they are hired; when it's bad, they are dismissed. When looking for a job, graduates should not only focus on the salary but also consider the company's retention rate of previous recruits and any history of breaching contracts. Don't overlook other opportunities just for a seemingly attractive offer, or you might miss the prime time for job hunting and end up in a similar situation.