Tesla laid off 10% of its workforce, and Musk sent an email confirming the matter. In addition, Tesla has suspended global hiring.
A number of media reported that insiders said that Tesla's China region also received information. As early as February this year, Tesla asked all managers to confirm the "key" members of their teams and conduct a "binary evaluation" of their subordinates.
It is not difficult to calculate that Tesla's 140,000 employees worldwide means that the number of layoffs is about 14,000, which is the largest layoff in Tesla's history. Since the beginning of 2017, counting this time, Tesla has made a total of 5 layoffs, but this time, it is different from before.
What are the reasons for the layoffs in China?
The reason for Tesla's layoffs, Musk mentioned in the email that he is preparing for the company's next stage of growth and seeking to reduce costs and increase efficiency. Expanding further, Tesla is facing problems such as declining profit margins, declining sales, and fierce market competition, and the company's prospects are not favored by the outside world, so Tesla has to solve these problems it is currently facing.
The biggest difference from the previous four layoffs is that the layoffs involve employees in China, which has not been affected before. Take the layoffs in June 2022, for example, when the layoffs did not include Chinese employees, on the contrary, Tesla was hiring on a large scale in China at that time, which was in sharp contrast to North America.
The reason is that although Shanghai was seriously affected by force majeure at that time, China's new energy vehicle market was in a stage of rapid growth, and the production capacity of Tesla's Shanghai Gigafactory needed to feed back to foreign markets. The involution of China's auto market has made Tesla, which originally had a cost advantage and could exercise pricing power, lose its advantage.
A brief review of Tesla's dynamics before the layoffs, first of all, the profit and sales in the first quarter were less than expected, and Musk himself realized that the electric vehicle market this year is not so fun. This was followed by Tesla's production cuts, as well as news of global price increases, and then the stock price plummeted. Then there was news that Tesla had abandoned the Model 2 plan, and Musk had to announce that the focus of this year would be on the robotaxi in August. Although the move brought Tesla's stock price up by 5%, as soon as the information about the layoffs was revealed, the previously recovered stock price evaporated again.
Prior to this layoff, Tesla delivered a good first-quarter result in China, but this does not refer to sales in China, but includes sales in foreign markets. Tesla sales once told us that Tesla has a few existing cars, but if you want to pick the color and configuration, you have to wait at least two weeks to four weeks to pick up the car. Tesla, which already has a very mature supply system, still needs such a long delivery cycle, in addition to the surge in sales brought about by the price increase at the end of March, and more importantly, the new cars produced by the Shanghai Gigafactory after that must first meet the supply of overseas markets.
The deeper problem is that Tesla's competitiveness in China is weakening, which leads to weaker demand for its products. This is also the reason why Tesla has reduced production in China and prioritized the supply of new overseas vehicles.
Netizens also questioned Tesla, Model 3 has only been remodeled after 7 years, and the changes are painless details, FSD has been transmitted to China, but there has been no sound, even if it enters China, only relying on pure visual solutions, it is difficult to say whether it is competitive. In other words, Tesla's product power has gone from "far ahead" to "no features" now, and even the key product power that can be said when selling products is only the product safety system that has been accumulated for a long time.
Therefore, continuing to reduce costs and continue to fight the price war may be Tesla's next strategy, but the premise is that the layoffs are successfully completed and the production costs of the Shanghai Gigafactory are further optimized.
Combined with the layoffs in 2022, after the completion, Tesla triggered an unexpected price war at the beginning of 2023, and the reason given by Tesla was that it benefited from the extreme control of costs. It is not difficult to see that the cost reduction here is also related to layoffs. This time, Tesla has the meaning of "repeating the old tricks", but it may not have expected that the involution of the global electric vehicle industry driven by Chinese car companies is so great.
Here I have to talk about Tesla's competitors, when Xiaomi SU7 entered the market with a starting price of 215,900, when Huawei equipped the lowest model with pure visual intelligent driving, when the AVATR 12 with high-end intelligent driving was priced at less than 270,000, even if Model 3 and Model Y had the lowest price in the world in China, it could not hide the fact that its competitiveness weakened.
After all, Tesla only sells naked cars in China, it costs money to choose the color, it costs money to add configuration, and most importantly, the FSD that has not landed costs 64,000 yuan, plus these, even if it is the lowest configuration model, the price is more than 300,000 yuan, and the price is not competitive. On the contrary, give up FSD, there is no expectation for it, although it has not entered China at this stage, buying it is equivalent to spending money in vain, but maybe it can be used one day, this money still has to be spent, otherwise, Tesla will lose the core value of its products.
To put it simply, Tesla's predicament this time is not the same as in 2022, this time it is facing greater pressure and more cumbersome to solve.
What is the relationship between Tesla's layoffs and the Chinese market?
It is worth discussing that in the era of intensified involution, can Tesla's current actions attract the attention of China's new energy vehicle companies?
Judging from the 2023 annual report, the only new energy vehicle companies that can make a profit are BYD, Ideal and Tesla. In other words, it is extremely difficult for pure electric vehicle companies to make a profit in a state of involution, and most of the world's mainstream pure electric vehicle companies are in China.
There are two things that need to be considered, in the face of Tesla's initiative to change, will China's pure electric car companies further "chase after victory", or empathize with the situation they are facing.
There are several levels to consider.
First, cost control. The reason why Tesla can become the leader of pure electric vehicle companies is that it can easily control the price of its products and has been able to maintain good profits. Although the profit margin will decline in fiscal 2023, it is still the most profitable pure electric vehicle company in the world.
In this regard, almost all pure electric vehicle companies in China have not been able to achieve it. This is also the biggest hidden danger in the future of the enterprise, in the case of fierce competition, continuous losses and increased investment are contradictory, but they have to do.
Second, market competition and market expectations. The leading car companies are not optimistic about market expectations, which may affect the confidence of investors and consumers in the industry, affect the development of the industry, and also affect the growth rate of sales. The simplest is that the growth rate of pure electric vehicles has slowed down significantly this year, and the growth rate of hybrid models has accelerated significantly, and there is a trend of devouring the pure electric market, which can explain the problem.
Third, the supply chain. The layoffs may have an impact on the supply chain, as the cost reduction and efficiency increase signals released by the layoffs may further reduce Tesla's vehicle materials and production costs.
Fourth, policy response. At present, the profitability of new energy vehicle companies itself reveals an unhealthy state of the industry, and Tesla's leadership may pull the industry back to a state of healthy competition, thereby improving the industry environment.
Overall, Tesla's layoffs in China seem to be the company's own behavior, but it also has a very important impact on the industry. It may be a bit big to say that it can affect the benign development of China's electric vehicle industry, but at least it can bring a warning to other friends.
epilogue
Tesla's layoffs, facing the current problems in the pure electric vehicle industry, the product force seems to be getting stronger and stronger, but the market growth is slowing down, the market share is about to be plugged and overtaken, the market response is hot, but it is not proportional to the terminal feedback, the most important thing is that the speed of vehicle price reduction is faster than the cost reduction. What cannot be reversed is that the pure electric vehicle market will continue to roll, but isn't it time to open the book in a benign way?