(Yicai Global) May 13 -- Li Auto has canceled some contracts with college students set to graduate this summer, as the Chinese electric carmaker taps the brakes on hiring because of declining sales due to the return of Covid-19 in China.

A number of college students have revealed on social media that Li Auto terminated the so-called ‘tripartite agreements’ -- signed between themselves, the automaker, and their schools -- that would have seen them join the company soon after graduation.

The agreements convert to labor contracts once the students graduate, according to China’s employment policies. If a party breaches the contract, compensation is due.

“Considering the inconvenience caused to the students, we offered them the options of changing positions or receiving compensation,” a representative of Li Auto told Yicai Global yesterday. “Negotiations are ongoing.”

The positions involved were connected with the research and development of cameras and internal systems, the Beijing-based company added.

The resurgence of Covid-19 in China has stymied car production. Li Auto’s deliveries fell nearly 25 percent to 4,167 units last month from a year earlier because most of its suppliers are located in Shanghai and the surrounding areas, which have borne the brunt of the recent Covid outbreaks in the country.

Li Auto rival Xpeng was also reported to have terminated agreements with students and to have laid off some staff, but the Guangzhou-based EV maker did not immediately respond to a request for comment. Bucking the trend, Xpeng’s vehicle deliveries soared 75 percent to 9,002 last month from a year ago.

New York-listed Li Auto said on May 9 that its net loss shrank 97 percent to CNY10.9 million (USD1.6 million) in the first quarter from a year earlier, buoyed by robust sales in the first three months of 2022.

Quarterly revenue soared 168 percent to CNY9.6 billion (USD1.5 billion) thanks to a nearly 169 percent leap in vehicle sales to CNY9.3 billion.

“While the recent pandemic resurgence and associated supply chain interruptions have been challenging for our industry, and uncertainty remains for the near future, we are confident in the resilience of our organization,” founder and Chief Executive Li Xiang said in a press release at the time.

In pre-market trading in New York today, Li Auto’s shares [NASDAQ: LI] were up almost 8 percent at USD20.12 apiece as of 4.43 a.m. local time. They ended yesterday little changed.

Editors: Dou Shicong, Futura Costaglione