BERLIN (Reuters): Tesla is undergoing significant workforce reductions, cutting over 10 per cent of its global employees amid declining sales and increased competition in the electric vehicle market, according to an internal memo seen by Reuters on Monday.
Two key departures, battery development chief Drew Baglino and vice president for public policy Rohan Patel, also raised investor worries.
Baglino, a long-time Tesla veteran, was among the core leadership team listed on the company’s investor relations website.
CEO Elon Musk justified the layoffs as a routine reorganization necessary for future growth, stating, “About every 5 years, we need to reorganize and streamline the company for the next phase of growth.”
The company’s headcount had surged from around 100,000 in late 2021 to over 140,000 by late 2023, as disclosed in filings with US regulators, despite Musk’s previous job cuts in 2022 due to economic concerns.
Scott Acheychek of Rex Shares viewed the headcount reductions as strategic, but Michael Ashley Schulman from Running Point Capital Advisors highlighted the departures of senior executives as a negative signal for Tesla’s growth prospects.
Tesla’s shares fell by 5 per cent to $162.42 following the news, with stocks of other electric vehicle manufacturers like Rivian Automotive, Lucid Group, and VinFast Auto also experiencing declines ranging from 2.2 per cent to 10.7 per cent.
In his memo to staff, Musk emphasized the importance of cost reduction and productivity enhancements to prepare for the company’s next phase of growth, which led to the decision to reduce headcount by more than 10 per cent globally.
Bloomberg reported that cuts of up to 20 per cent could occur in certain divisions.
An email seen by Reuters informed at least three US employees of their immediate dismissal, and Tesla did not initially respond to requests for comment.
These job cuts followed a Reuters report on April 5 that Tesla had scrapped plans for a $25,000 mass-market car, the Model 2, which investors had anticipated to drive broader growth.
Musk disputed the report without specifics and has not commented further on the Model 2, leaving uncertainty among investors.
Reuters also disclosed Tesla’s shift towards focusing on self-driving robotaxis on a small-car platform, with Musk announcing a “Tesla Robotaxi unveil on 8/8” without further details.
Tesla’s struggles are part of a broader trend in the EV industry, with energy major BP also downsizing its EV charging workforce due to slower-than-expected demand growth.
The labour union at Tesla’s German plant criticized the lack of consultation regarding the job cuts, stressing the legal obligation for management to engage with them.
Analysts suggest Tesla’s cost pressures stem from investments in new models and AI, with the company reporting a drop in global vehicle deliveries for the first time in nearly four years.
Rivals in China are aggressively rolling out cheaper models, impacting Tesla’s market position.
Despite these challenges, Tesla is expanding into India’s auto market this year, planning to produce cars in Germany for export to India while establishing showrooms and service hubs in major Indian cities.
In the fourth quarter, Tesla recorded its lowest gross profit margin in over four years.
The recent job cuts underscore broader challenges facing the company as it navigates a shifting EV landscape.
