Elon Musk, the CEO of Tesla, informed staff members in a memo that the company will be laying off over 10% of its global workforce.
TakeAway Points:
- Tesla is set to cut down more than 10% of its global workforce.
- The company’s stock ended the day lower than 5% on Monday.
- In addition to the layoffs, Tesla executives Drew Baglino and Rohan Patel announced Monday they’re leaving the company.
Tesla Lays of Staff
The company’s shares closed down more than 5% on Monday.
“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk said in the memo obtained by CNBC.
“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the memo said.
The memo was first reported by Electrek. Tesla had 140,473 employees as of December 2023.
Recent months have seen a 31% decline in Tesla shares year-to-date. The global market for electric vehicles is still growing, but the pace of growth in sales has slowed, particularly for Tesla. The business is currently up against more rivals than before.
China’s BYD briefly overthrew Tesla as the leading EV manufacturer in the world by the end of 2023. In March, Xiaomi, a Chinese smartphone manufacturer, announced that its first electric vehicle will be sold for significantly less than Tesla’s Model 3.
Tesla’s Biggest Competitors
Musk has acknowledged in the past that the company’s biggest competitors might reside in China, the location of a sizable Tesla factory. Many people believe that Tesla will rank among the top ten automakers, with nine Chinese automakers following behind. “I believe they may not be incorrect,” Musk stated in November.
A few potential Tesla buyers are now avoiding the company because of Musk’s divisive remarks.
Prior Decline and Advancement
Tesla announced earlier this month that first-quarter vehicle deliveries fell by 8.5% on the year to 386,810, with output down 1.7% from a year earlier and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter. This is the company’s first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted production beyond demand.
Recently, Tesla reduced the annual membership cost for its top-tier driver assistance programme, known as Full Self-Driving, or FSD, for customers in the United States. Musk had previously promised that the FSD price would only increase as Tesla added features and capability to the system, so this action was a stark contrast to his earlier promises. Despite the moniker, the technology does not enable self-driving operation in Tesla vehicles; instead, the driver must always be aware of their surroundings and be prepared to steer or brake.
The company’s operating margin, which was 8.2% in the fourth quarter after falling to 16% a year earlier, is still under pressure, and Tesla has alerted investors to the possibility that this year’s vehicle volume growth “may be notably lower” than that of 2023 because it is “currently between two major growth waves.”
This year, logistical difficulties made Tesla’s issues worse. Due to suspected arson at a nearby energy substation, the automaker’s gigafactory outside Berlin was forced to temporarily cease production, while the company’s component supply suffered due to disruptions caused by Yemeni Houthi maritime attacks in the Red Sea.
More Reduction in Staff
Along with the layoffs, Tesla executives Rohan Patel and Drew Baglino made their departure from the firm known on Monday. Since 2006, Baglino has been associated with Tesla, having begun as an electrical engineer and firmware developer. After serving as a senior assistant to former President Barack Obama on climate and other policy issues, Patel joined Tesla in 2016.
However, Tesla is expected to release its first-quarter financial results on April 23.
