Tesla lays off more than 10 percent of employees

Due to declining sales and rising prices of electric vehicles, Tesla will lay off 10 percent of its global workforce, as indicated by an internal memo sent by Elon Musk, CEO of Tesla, to employees on Sunday, which Reuters gained access to today.

In December 2023, this second largest global manufacturer of electric vehicles had 140,473 employees worldwide, of which over 20,000 people work at Tesla’s Fremont factory in California, meaning that more than 14,000 Tesla employees in numerous countries around the world will lose their jobs.

Increase in productivity

Although the memo does not specify how many jobs will be affected or where, a source familiar with the matter (who wished to remain anonymous due to the sensitivity of the topic) told Reuters that some employees have already been notified about the layoffs. Business Insider learned from two informed sources that some Tesla employees have already lost access to their official emails.

– As we prepare the company for our next phase of growth, it is extremely important to examine every aspect of the company for cost reduction and productivity increase – Musk said in the memo.

For this reason, Tesla has reportedly conducted a thorough review of the organization and ‘made the difficult decision to reduce the number of employees by more than 10 percent globally’.

Despite Musk now noting that ‘there is nothing he hates more’ than layoffs, he has often reduced the number of employees in his companies in the past to cut costs. For example, shortly after acquiring Twitter (now X) in 2022, he laid off more than half of the employees.

Stocks in decline

Immediately after the announcement of the layoff of 10 percent of employees, Tesla’s shares fell by more than 1 percent on Monday.

Due to the slow transition of consumers from traditional internal combustion engine vehicles, Tesla’s shares have fallen by about 31 percent since the beginning of this year, unlike other electric vehicle manufacturers such as Toyota Motors and General Motors, whose shares have risen by 45 and 20 percent, respectively, according to Reuters.

However, besides Tesla, the energy giant BP has also laid off more than ten percent of its workforce in its electric vehicle charging business, for the same reasons – the bet on rapid growth of commercial electric vehicles is not profitable. In other words, demand for electric vehicles has significantly slowed.

As Craig Irwin, a senior research analyst at Roth Capital, explained to Reuters, ‘the layoffs imply that management expects weak demand to persist’.

High interest rates and competition

Indeed, as Tesla reported this month, global deliveries of Tesla’s electric vehicles in the first quarter of this year fell for the first time in nearly four years, by 20 percent compared to the third quarter of 2023 and 8 percent compared to the first quarter of 2023. Neither the price reductions of vehicles introduced last year nor the first marketing advertising in the company’s history have apparently succeeded in boosting demand.

Musk warned in January about a slowdown in sales in 2024, stating that the company is ‘between two major waves of growth’, and will report on the financial results of the first quarter on April 23.

Furthermore, given that high interest rates have reduced consumer appetite for expensive items, Tesla has been slow to upgrade its outdated car models and has also canceled the launch of the long-awaited affordable electric vehicle that investors hoped would stimulate mass market growth.

At the same time, Tesla’s competitors in China, currently the largest automotive market in the world, are releasing cheaper models of electric vehicles. BYD, for example, surpassed Tesla in the fourth quarter of 2023 and became the largest global manufacturer of electric vehicles by market value, while Xiaomi is becoming an increasingly strong competitor. All of this has reflected on Tesla’s margin, which was 17.6 percent in the fourth quarter of 2023, the lowest in over four years.

A series of layoffs

Rumors about layoffs at Tesla have already begun in recent months. Bloomberg reported back in February that Tesla had started identifying key people in the company.

However, these are not the first mass layoffs at Tesla. In February last year, the company laid off 4 percent of employees working on the autopilot service in New York, just before employees were set to launch a union campaign. However, Tesla stated at the time that the layoffs had nothing to do with the announced union campaign at the facility, but that employees were laid off due to poor performance.

Additionally, Tesla slowed down hiring new people last year. Business Insider reported last May that Musk even began personally approving all new hires at Tesla.