(Image credit: CNN)
On April 15, local time, Tesla CEO Elon Musk issued an email to all employees, announcing that he would lay off more than 10% of his workforce globally to cut costs, improve productivity, and prepare for the next stage of growth. This means that at least 14,000 employees will leave Tesla.
Tesla's stock price fell more than 5% after the news broke, and its market value evaporated by more than $30 billion, and the market value was $514.28 billion as of the day's close, more than half of the $1.1 trillion it peaked two years ago. The start of the large-scale layoffs also coincided with a rare decline in Tesla's sales as global demand for electric vehicles slowed down, the price war escalated, and Tesla's sales declined.
01
Musk's core deputy resigned
Musk said in an email that with Tesla's rapid growth over the past few years, "there has been an overlap of roles and job functions in certain areas within the company." In order to reduce costs and improve production efficiency, Tesla conducted a thorough review of the company's organization "and made the difficult decision to reduce the number of employees worldwide by more than 10 percent." ”
Musk's letter to all employees confirmed earlier reports from foreign media. Previously, it was rumored that Tesla was preparing for a round of large-scale layoffs, and Tesla executives were asked to identify the "most important roles" in the team and postpone performance reviews of some employees, and some employees said that the number of layoffs could be as high as 20%, which made many employees very worried, and now the layoff ratio is determined to be "more than 10%".
This is not the first time Tesla has made mass layoffs, as it follows layoffs in 2017, 2018, 2019 and 2022. Despite this, Tesla's total number of employees has grown significantly over the past few years, from 38,000 at the end of 2017 to nearly 128,000 at the end of 2022 and more than 140,000 at the end of 2023.
Tesla's previous filing with the U.S. Securities and Exchange Commission (SEC) shows that Tesla has a total of 140473 employees worldwide at the end of 2023. Based on this, the "10% or more" layoff rate means that at least 14,000 people will lose their jobs.
The mass layoffs also affected senior executives. On April 15, Tesla executives Drew Baglino and Rohan Patel announced that they were leaving Tesla. Musk thanked the two executives on the social platform X. Among them, Baglino left his previous position as senior vice president of powertrain and energy engineering, he is Musk's core deputy and one of Tesla's earliest employees, having been with the company for 18 years. Patel, vice president of public policy and business development, also left with Baglino.
In response, Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, said their departure "shows that Tesla is facing significant headwinds during its major growth phase." He sees this as a "bigger negative signal" than layoffs.
(Image credit: Vienna Times website)
02
First-quarter results may be the "last straw"
Behind Tesla's large-scale layoffs, warnings of a slowdown in the global electric vehicle market have come and gone, and Tesla's first-quarter data released on April 2 may be the "last straw" that prompted it to make up its mind.
Tesla's results for the first quarter of 2024 were gloomy due to the continued slowdown in global demand and fierce competition among its peers, raising concerns among investors about its growth and profitability. In terms of sales, Tesla's global deliveries in the first quarter fell 8.5% year-on-year to about 386,800 units, the first year-on-year decline since 2020, and the month-on-month decline was more than 20%, and far below the average analyst expectation of 449,000 units.
Tesla's explanation for this is that the production of the new version of the Model 3 is in the ramp-up phase, the logistics disruption caused by the Red Sea conflict, and the factory shutdown caused by the arson of the Berlin Gigafactory have affected production and deliveries. However, the outside world does not seem to agree with this explanation. Emmanuel Rosner, an analyst at Deutsche Bank, pointed out that Tesla's production in the first quarter was 433,000 units, and the difference between production and sales reached nearly 50,000 units, indicating that in addition to the known production bottlenecks, Tesla may have serious demand problems. Dan Ives, an analyst at Wedbush Securities, said: "This is probably one of the most difficult times for Musk and Tesla in the last four or five years. ”
Unlike traditional automakers, Tesla is clearly more susceptible to the slowdown in demand for electric vehicles, especially in the Chinese market. On the one hand, fierce competition from Chinese electric vehicle manufacturers, and on the other hand, the slowdown in the global electric vehicle market, a series of factors have made Wall Street continue to be bearish on Tesla.
In fact, before the announcement of the layoffs, Tesla's stock price has fallen by more than 30% since the beginning of this year, and its market value has evaporated by more than $250 billion due to market concerns that Tesla has lost its growth momentum. Coupled with Reuters' revelation that Tesla will abandon the Model 2, a low-priced electric car that investors have high hopes for, although Musk immediately refuted the rumors, it still caused some negative impacts. At present, Tesla is still the world's most valuable car company, but it has shrunk by more than half compared with its own peak.
(Image credit: AP)
03
Look for cardiotonics
Regarding Tesla's layoffs, Ives said: "This is an ominous sign that there will be some dark days ahead. Downsizing is one thing, but the scale of layoffs is worrying for a company that is still in growth mode. ”
Craig Owen, senior research analyst at Ross Capital, said the news was "not a surprise in itself". "It's more like an acknowledgment that economic growth isn't going to recover quickly," he added. ”
"The layoffs come at a time when slowing EV sales are making waves in the global automotive industry, with companies across the supply chain, from South Korea to Germany, laying off workers and cutting costs," the Financial Times noted. In fact, also on April 15, China's power battery giant CATL announced its first-quarter results, with revenue of 79.8 billion yuan, down 10.4% year-on-year, lower than expected, showing the impact of the slowdown in demand for electric vehicles on the entire industry chain.
In this context, Tesla is looking to achieve sales breakthroughs in more markets around the world, one of which is India. In March this year, there was good news from the Indian market, the Indian government agreed to reduce the import tariff on electric vehicles above $35,000 to 15% in exchange for overseas car companies to start local production of electric vehicles in the country. The outside world believes that the move is mainly to attract Tesla to build a factory in India. According to a number of foreign media reports, Musk will visit India in late April to meet with Indian Prime Minister Modi, during which he will announce Tesla's investment plan to build a factory in India.
At the same time, Tesla is also making efforts in the field of cutting-edge technology. In the above-mentioned letter to all employees, Musk said: "We are developing some of the most revolutionary new technologies in the automotive, energy and artificial intelligence sectors. In addition, Musk recently released a brief and heavy news on social platforms: Tesla will release a driverless taxi (Robotaxi) product on August 8. Tesla hopes to use this to revive investor confidence.
Text: Zhang Dongmei Editor: Huang Xia Layout: Wang Kun
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