Tesla announces mass layoffs of its global workforce

Tesla (TSLA.O) plans to lay off more than 10% of its global workforce, as revealed by an internal memo seen by Reuters on Monday. The decision comes amid a drop in sales and an intensification of the price war for electric vehicles.

As of December 2023, the world’s largest automaker by market value employed 140,473 people globally, according to its latest annual report. The internal memo did not specify how many jobs would be affected.

Some employees in California and Texas have already received notices of the layoffs, according to a source familiar with the matter, who declined to be identified due to the sensitivity of the issue.

“As we prepare the company for our next phase of growth, it is critically important to analyze all aspects of the company for cost reductions and increased productivity,” Tesla CEO Elon Musk said in the memo.

“As part of this effort, we have thoroughly reviewed the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the statement said.

Tesla has not yet responded to a request for comment.

Tesla shares fell about 3% in early trading.

These layoffs follow an exclusive Reuters report on April 5 that revealed Tesla’s cancellation of a long-promised low-cost car expected to cost $25,000, a vehicle that investors had hoped would drive mass market growth. Musk had mentioned that the car, known as the Model 2, would begin production in late 2025.

Shortly after the report was published, Musk posted “Reuters is lying” on his social media site X, without specifying any inaccuracies. Since then, he has not commented on the car, leaving investors and analysts to speculate about its future.

Tesla also announced a shift in focus to autonomous robotaxis, built on the same platform as the small car. Musk posted on X that night: “Tesla Robotaxi Presentation 8/8”, without further details.

Tesla may be years away from launching a fully autonomous vehicle with regulatory approval, according to self-driving car and regulatory experts.

This is not the first time that Musk has mentioned a 10% reduction in headcount. In 2022, he indicated he needed to cut jobs at the automaker due to a “very bad feeling” about the economy. Tesla has never specified how many jobs it will cut in 2022, although its total number of employees has increased.

Tesla shares are down about 31% so far this year, while traditional automakers like Toyota Motor (7203.T) and General Motors (GM.N) have seen increases of 45% and 20%, respectively. This reflects a slow transition by consumers away from traditional internal combustion vehicles.

Energy giant BP (BP.L) also cut more than a tenth of the workforce in its EV charging business after a bet on rapid growth in commercial EV fleets failed, Reuters reported on Monday , highlighting the broader impact of slowing EV demand.

A newly elected works council, union representatives at Tesla’s German plant, was not informed or consulted before the announcement to employees, said Dirk Schulze, head of the IG Metall union in the region.

Analysts point out that the layoffs are a sign that Tesla will face difficulties in maintaining growth.

“Tesla is maturing as a company and is no longer the growth story it used to be,” said Craig Irwin, senior research analyst at Roth Capital. “The layoffs imply that management expects weak demand to persist.”

Analysts at Gartner and Hargreaves Lansdown said the cuts are a sign of cost pressures as the automaker invests in new models and artificial intelligence.

Tesla reported this month that its first-quarter global vehicle deliveries fell for the first time in nearly four years as price cuts failed to stimulate demand.

The EV maker has been slow to renew its aging models as high interest rates have dampened consumer appetite for big-ticket items, while competitors in China, the world’s biggest auto market, are launching cheaper models.

The company is looking to strengthen its margins, which have been hurt by repeated price cuts, especially in China, where it faces stiff competition from local rivals including market leader BYD (002594.SZ), which briefly overtook the US company as the biggest world’s EV maker in the fourth quarter, and new entrant Xiaomi (1810.HK).

It is also preparing to start sales in India, the world’s third-largest car market, this year, producing cars in Germany for export to India and scouting locations for showrooms and service centers in major cities.

Tesla reported a 17.6% gross profit margin in the fourth quarter, the lowest in more than four years.

Tesla had previously laid off 4% of its New York workforce in February last year as part of a performance review cycle and before a union campaign was launched by its employees. Technology publication Electrek first reported the latest job cuts.

Fonte: Reuters