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Tesla Cuts Workforce by 14% Due To Decreasing Sales

Tesla reduces staff by 14% to 121,000 amidst decreasing sales.

TakeAway Points:

  • Tesla reduced its workforce by over 14% in 2023, now employing just over 121,000 people, amid declining sales and increased competition.
  • Wedbush maintains OUTPERFORM rating for Tesla with $275 base target, citing AI and FSD as key to $1 trillion+ valuation.
  • Tesla’s robotaxi unveiling on August 8th is viewed as a potential catalyst for stock growth and autonomous vision.

Tesla Cuts down Workforce 

Tesla has significantly reduced its global headcount in 2023, bringing the total number of employees to just over 121,000, including temporary workers. This represents a reduction of more than 14% from the end of 2022, when the company reported having 140,473 employees. 

The latest figure is derived from Tesla’s “everybody” email distribution list as of June 17, as viewed by CNBC. CEO Elon Musk communicated to employees that Tesla would be conducting a comprehensive review to provide stock option grants for exceptional performance, with options also awarded to those who make outstanding contributions to the company.

The downsizing was first announced in April, when Musk sent a companywide email indicating that Tesla would cut more than 10% of its staff. Bloomberg reported that Musk was aiming for a 20% reduction, and Musk later suggested that the number could be even higher. 

On the company’s first-quarter earnings call, Musk stated, “We’ve made some corrections along the way, but it is time to reorganize the company for the next phase of growth.” 

The layoffs have coincided with a decline in Tesla’s sales, attributed to an ageing lineup of electric vehicles and increased competition, particularly in China. For the first quarter, Tesla reported a 9% drop in annual revenue, the largest decline since 2012.

Tesla to unveil its first Robotaxi

Wedbush Securities has reaffirmed its OUTPERFORM rating for Tesla (TSLA), maintaining a base case price target of $275 and a bull case target of $350. This outlook comes as Tesla prepares to unveil its first robotaxi on August 8th, 2024, a move that analysts believe could be a pivotal moment for the company’s future valuation.

AI Bullish Outlook

Wedbush analyst Daniel Ives emphasizes the critical role of Tesla’s artificial intelligence (AI) and autonomous driving capabilities in achieving a $1 trillion+ valuation. The firm’s bullish stance is largely predicated on the success of Tesla’s Full Self-Driving (FSD) technology and its broader autonomous vision. Ives notes:

“Ultimately the key to reaching a $1 trillion+ valuation is the autonomous and FSD vision taking hold for Tesla which appears to be turning a corner with this latest FSD v12.4 and now China FSD testing underway.”

This perspective underscores the importance of Tesla’s upcoming robotaxi unveiling, which Wedbush views as a “key historical moment” and a potential near-term catalyst for the stock.

Musk’s Compensation Package

Recent developments in Elon Musk’s compensation package are seen as crucial for aligning the CEO’s interests with Tesla’s AI initiatives. Wedbush expects the Tesla Board to structure a new incentive-driven AI compensation package that would increase Musk’s ownership to 25% or more while keeping all AI projects within Tesla. This move is anticipated to resolve concerns about potential AI-related spin-offs or separate ventures.

“We would expect once Tesla officially gets through the final steps in this Twilight Zone Delaware legal spider web that the Board will have a new incentive driven AI comp package for Musk that gets him to 25%+ ownership while keeping all AI initiatives under the hood of Tesla,” Ives stated.

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