Tesla to lay off more than 10% of global workforce – Elon Musk explains why

Tesla CEO Elon Musk announced in a leaked memo that the company will lay off over 10% of its workforce globally in an effort to streamline the company, cut costs, and increase productivity.

In the wake of the announcement, Tesla’s shares dropped roughly 0.5% in premarket trading Monday, according to NBC News.

“Over the years, we have grown rapidly with multiple factories scaling around the globe. With this rapid growth there has been duplication of roles and job functions in certain areas. 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, breaking the news of the layoffs.

“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. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle,” the memo continued.

“I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission and we wish you well in your future opportunities. It is very difficult to say goodbye,” Musk told his employees.

For those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are developing some of the most revolutionary technologies in auto, energy and artificial intelligence. As we prepare the company for the next phase of growth, your resolve will make a huge difference in getting us there,” he concluded in the memo.

Tesla employs 140,473 workers globally as of December 2023. That means that over 14,000 will get pink slips. The news was first reported by the tech publication Electrek.

“Tesla shares have taken a bruising in recent months, down 31% year-to-date amid waning demand for electric vehicles and stiffening competition from Chinese automakers, which benefit from Beijing subsidies. One of these rivals, BYD, last year wrested Tesla’s mantle to become the world’s largest seller of EVs — and Musk has previously recognized that China, which is home to a large Tesla plant, may also house the company’s strongest competition,” NBC News reported.

“There’s a lot of people who are out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong,” Musk commented back in November, according to the media outlet.

Tesla reported in early April that it was experiencing its first annual decline in vehicle deliveries since 2020. First-quarter deliveries dropped by 8.5% on the year to 386,810. Output went down “1.7% from a year earlier and 12.5% sequentially,” NBC News noted.

Cuts are taking place in other areas of the company as well.

“Since then, the firm has also resorted to trimming the subscription price of its premium driver assistance system, the Full Self-Driving package, for U.S. customers — in a move sharply at odds with Musk’s previous pledges that the FSD fee would only bulk up as Tesla bolsters the system’s features and functionality,” the media outlet noted.

“But the squeeze on the company’s operating margin — which came in at 8.2% in the fourth quarter, down from the 16% for last year — remains, and Tesla has warned investors to brace that vehicle volume growth this year ‘may be notably lower’ than the rate logged in 2023, noting it is ‘currently between two major growth waves,'” NBC News added.

“Tesla executives have described the company as being between two growth waves: the first driven by the company’s popular Model 3 car and Model Y crossover, and the second by its next generation of vehicles,” the Wall Street Journal clarified.

Tesla is looking to capitalize on two projects coming up. One more than the other.

“This next generation has been expected to include both a robotaxi and a less expensive model designed to extend Tesla’s reach into the mass market. Employees in recent weeks have been told to give priority to the robotaxi,” the Wall Street Journal stated.

Tesla has had a number of challenges this year. Yemeni Houthi maritime attacks in the Red Sea have disrupted component supplies. The company’s gigafactory near Berlin, Germany was forced to shut down production temporarily due to a suspected arson at an electricity substation as well.

(Video Credit: Fox Business)

First-quarter financial results will be posted by Tesla on April 23.


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