Tesla laying off more than 10% of staff globally as sales fall

[JohnS]

Tesla laying off more than 10% of staff globally as sales fall

By Victoria Waldersee - April 16, 2024

BERLIN, April 15 (Reuters) - Tesla is laying off more than 10% of its global workforce, an internal memo seen by Reuters on Monday shows, as it grapples with falling sales and an intensifying price war for electric vehicles (EVs).

"About every five years, we need to reorganize and streamline the company for the next phase of growth," CEO Elon Musk commented in a post on X. Two senior leaders, battery development chief Drew Baglino and vice president for public policy Rohan Patel, also announced their departures, drawing posts of thanks from Musk although some investors were concerned.

Musk last announced a round of job cuts in 2022, after telling executives he had a "super bad feeling" about the economy. Still, Tesla headcount has risen from around 100,000 in late 2021 to over 140,000 in late 2023, according to filings with U.S. regulators.

Baglino was a Tesla veteran and one of four members, along with Musk, of the leadership team listed on the company's investor relations website.

Scott Acheychek, CEO of Rex Shares - which manages ETFs with high exposure to Tesla stock - described the headcount reductions as strategic, but Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, deemed the departures of the senior executives as "the larger negative signal today" that Tesla's growth was in trouble.

Less than a year ago, Tesla's chief financial officer, Zach Kirkhorn, left the company, fueling concerns about succession planning.

Tesla shares closed 5.6% lower at $161.48 on Monday. Shares of EV makers Rivian Automotive, Lucid Group and VinFast Auto also dropped between 2.4% and 9.4%.

"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 sent to all staff.

"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," it said.

Reuters saw an email sent to at least three U.S. employees notifying them their dismissal was effective immediately.

Tesla did not immediately respond to a request for comment.

MASS MARKET

The layoffs follow an exclusive Reuters report on April 5 that Tesla had cancelled a long-promised inexpensive car, expected to cost $25,000, that investors have been counting on to drive mass-market growth. Musk had said the car, known as the Model 2, would start production in late 2025.

Shortly after the story published, Musk posted "Reuters is lying" on his social media site X, without detailing any inaccuracies. He has not commented on the car since, leaving investors and analysts to speculate on its future.

, opens new tab A Tesla car is seen in Santa Monica, California, United States, October 23, 2018. REUTERS/Lucy Nicholson/File Photo

 

Tech publication Electrek, which first reported the latest job cuts, said on Monday that the inexpensive car project had been defunded and that many people working on it had been laid off.

 

Reuters also reported on April 5 that Tesla would shift its focus to self-driving robotaxis built on the same small-car platform. Musk posted on X that evening: "Tesla Robotaxi unveil on 8/8," with no further details.

 

Tesla could be years away from releasing a fully autonomous vehicle with regulatory approval, according to experts in self-driving cars and regulation.
Tesla shares have fallen about 33% so far this year, underperforming legacy automakers such as Toyota Motor and General Motors, whose shares have rallied 45% and about 20% respectively.

Energy major BP has also cut more than a tenth of the workforce in its EV charging business after a bet on rapid growth in commercial EV fleets did not pay off, Reuters reported on Monday, underscoring the broader impact of slowing EV demand.

WORKS COUNCIL

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

"It is the legal obligation of management not only to inform the works council but to consult with it on how jobs can be secured," Schulze said.

Analysts from Gartner and Hargreaves Lansdown said the cuts were a sign of cost pressures as the carmaker invests in new models and artificial intelligence.

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

The EV maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world's largest auto market, are rolling out cheaper models.

China's BYD briefly overtook the U.S. company as the world's largest EV maker in the fourth quarter, and new entrant Xiaomi has garnered substantial positive press.

Tesla is gearing up to start sales in India, the world's third-largest auto market, this year, producing cars in Germany for export to India and scouting locations for showrooms and service hubs in major cities.

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

Source: https://www.reuters.com/business/autos-transportation/tesla-lay-off-more-than-10-its-staff-electrek-reports-2024-04-15/

[Fuzz]

It will be interesting to see if Tesla can hold on to their market share this year. Geely (owns Lotus, Volvo, Polestar plus a few other brands) is also coming out with an EV for their Zeekr brand, though aimed more at MPVs and small SUVs. BYD released the Seal recently in Aus, I actually saw one on the road last week.

Can't wait for the Xiaomi EV to hit showrooms in Aus. I wanna see one!

[BrightonCorgi]

All the manufacturers should be worried about Xiaomi. If you see videos on their factories; it's almost completely automated. Does little for China's unemployment, but does well for the stock holders. 

[VeguerosMAN]

It isn't the first time Tesla laid off 10% of staff.  Also happened in 2022 and previous years. 

[Hammer Smokin']

Correct, but the last layoffs were targeted. (which is a normal business process). This one was different. This was an across the board reduction, including the service centres, which are already vastly underperforming (not enough locations, not enough staff). 

I've read from a few people, "Oh tesla does this every year". Nope. This one was quite different. (At least for those of us paying attention.)

[MrBirdman]

Yet Musk is going to ask shareholder to approve a new $47B pay package. Quite the look!

Of course if they do, I don’t understand how the attorneys for the original derivative suit should get the $5B in fees they’ve asked for and will probably get.

[Lamboinee]

I hope they lay off even more employees, maybe it will prevent them from making more Tesla cars. Either lay off more employees or have a battle royal between UAW and Tesla employees. Anything to prevent more Tesla's from being built. 

Best wishes to those Tesla employees that have to find new jobs.

[Fuzz]

10 hours ago, BrightonCorgi said:

All the manufacturers should be worried about Xiaomi.  If you see videos on their factories; it's almost completely automated.  Does little for China's unemployment, but does well for the stock holders. 

The Xiaomi factory is actually owned by BAIC. A lot of Chinese car factories are now nearly fully automated, with only a small part of human interaction during the build.

 

This is the Changgan factory.

 

[helix]

16 hours ago, BrightonCorgi said:

All the manufacturers should be worried about Xiaomi

Unbelievable really. So advanced.

[BrightonCorgi]

58 minutes ago, helix said:

Unbelievable really. So advanced.

I wonder if Mexico is having 2nd thoughts on these factories moving there?