Musk struggled to "wield a knife" to lay off tens of thousands of employees, and China's sales department may become a hard-hit area

Reporter Yang Rangchen and Quartz Jing report from Shanghai

Tesla, the "catfish" that has stirred up the Chinese auto market many times, suddenly announced a global layoff of 10,000 people, affecting the Chinese market, and its performance may be under pressure.

"There's nothing more annoying to me than layoffs, but I have to. On the afternoon of April 15, Beijing time, Tesla CEO Elon Musk issued an internal letter saying that he would lay off 10% of its workforce globally, and said that this was a difficult decision made after a thorough review of the company's organization.

According to relevant data, by the end of 2023, Tesla has about 140,500 employees worldwide, and a 10% layoff rate means that more than 10,000 employees will lose their jobs at Tesla.

The global layoffs have also affected the Chinese market. The reporter of "China Business Daily" noticed that at present, many positions in Tesla China, including sales, research and development, testing, etc., are within the scope of layoffs. "I was laid off after only two weeks on the job, and I opened two orders in those two weeks. Liu Yan (pseudonym), who had just joined Tesla's sales position, told reporters that the layoff was sudden and without any warning. Lin Yu (pseudonym), who was also on probation, also received a layoff notice, "I was laid off before my training was completely over." ”

Regarding the above-mentioned Tesla layoffs in China, the reporter interviewed Tesla China for verification, but has not received a reply as of press time.

However, according to media reports, on April 17, local time, Musk admitted the mistake of the layoffs in an email sent to employees. "In the process of restructuring Tesla, I noticed that some severance payments were wrongly underpaid, and I apologize for the mistake and am correcting it immediately. ”

As of 16:00 EST on April 18, Tesla's stock price has fallen for five consecutive trading days, falling below the $150 mark, closing at $149.93 per share, a 15-month low, and its market value has evaporated by $78.6 billion, or about 568.96 billion yuan.

Sudden big layoffs

"On the day I received the layoff notice, I was blind, and I haven't fully sobered up yet. Lin Yu told reporters that he entered a Tesla store half a month ago, but received a layoff notice before the training was completed. "On April 15, Tesla released an internal letter about layoffs, and on the 16th, I was interviewed for 10 minutes about layoffs, and it only took 3 minutes to sign. Lin Yu told reporters that Tesla's layoffs were "very efficient".

Lin Yu is not the only laid-off employee who feels this way, Liu Yan also told reporters that he also received a layoff notice on April 16, and the interview lasted about 10 minutes, "There are 8 people in the store, and I was laid off one, and I am very blind." Before that, Liu Yan didn't think he would be laid off. "It's only been two weeks since I've been on the job, but I've already won two orders. In Liu Yan's view, this layoff is not only KPI.

A sales consultant of a Tesla store in Shanghai told reporters that the layoffs in Tesla's sales department are basically in every store, but as for the number of layoffs in their stores, the sales consultant said that they could not provide it, "The company does not allow us to disclose the layoff data of the store." ”

Another person familiar with the matter told reporters that some stores cut the original team of 16 people to 10 people, "The layoffs in the Shenzhen store are even more tragic, and all new employees have been laid off." ”

In fact, in addition to the layoffs in the sales department, the reporter noticed that there were also layoffs in many positions, including R&D and testing.

However, although Tesla's layoffs were rapid, many of the laid-off employees interviewed told reporters that Tesla's compensation for layoffs was N+3, not N+1 as required by law.

As for the reasons for this layoff, Musk said in the open letter that over the years, the company has grown rapidly, opening several factories around the world, and with this rapid growth, the company has seen duplication of roles and job functions in some areas. "When preparing for the next phase of growth, it is extremely important to look at all aspects of the company to reduce costs and increase production. ”

In the view of Jiang Han, a senior researcher at Pangu Think Tank, Tesla's sudden global layoffs are Tesla's response to increasingly fierce market competition and operating pressure. "Layoffs can directly reduce human resource costs, including fixed expenses such as salary expenses and benefits, which can help alleviate short-term financial pressure and improve operating profit margins. Jiang Han further told reporters that by streamlining the organizational structure and optimizing the job setting, Tesla can eliminate redundant positions, reduce internal communication costs, improve decision-making efficiency, and enable the company to respond to market changes faster.

Zhang Xiang, a visiting professor at the Yellow River Institute of Science and Technology, also told reporters that Tesla's layoffs were to reduce costs when the performance did not meet expectations. "New cars are released frequently in the Chinese market, and although Tesla is highly profitable, there are currently limited models in the Chinese market. Zhang Xiang said that Tesla's layoffs are to reduce costs and increase efficiency.

Declining performance

According to relevant media reports, in February this year, Tesla postponed the performance appraisal of some employees, and then rumors about Tesla's layoffs began to appear, and some overseas media quoted people familiar with the matter as saying that the number of layoffs may be as high as 20%, but at that time, Tesla spokespeople did not respond to the media on this news.

Tesla's 2023 financial report also confirms this view. The reporter noted that although Tesla's total revenue will increase by 18.8% to $96.773 billion in 2023, the consolidated net profit will also increase by 18.73% year-on-year to $14.976 billion. However, the growth rate of Tesla's return on net assets, return on assets, gross profit margin and other key indicators in 2023 has begun to slow down year by year since 2021.

Among them, the return on equity fell to 27.95% in 2023, a decrease of more than 15%, after reaching a high of 33.6% in 2022. Return on assets also declined, with Tesla's return on assets reaching 15.88% in 2023, down 8.84% from the same period last year. Tesla's net profit margin growth in 2023 has also slowed to 15.5%, only 0.05 percentage points higher than in 2022.

This is also reflected in the sales figures, with Tesla seeing a decline in sales in the first quarter of this year. It is understood that Tesla's global deliveries in the first quarter of this year reached 386,800, down 8.53% from the same period last year and 20.1% from the previous quarter. This is the first time in five quarters that Tesla has seen a quarterly sales decline.

According to the data of the Passenger Association, in the first quarter of this year, Tesla's retail sales in China reached about 132,400 units, down 3.6% from the same period last year, ranking third among new energy manufacturers, behind BYD and Geely Automobile, with a market share of about 7.5%.

Tesla may start to increase the price of its products globally since 2024 in order to improve gross profit margin and sales. The reporter noted that as of April this year, Tesla has increased the price of its Model Y in Europe, North America and other regional markets.

In the Chinese market, Tesla also bucked the trend and raised prices. On April 1, Tesla raised the price of the Model Y in the Chinese market to 263,900 yuan, the price of the Model Y long-range version to 304,900 yuan, and the price of the Model Y high-performance version to 368,900 yuan, all of which increased by 5,000 yuan. It is worth noting that on the same day of the price increase, Tesla China officially announced that the original price of 12,000 yuan of starry sky gray paint, from now on Model 3 and Model Y can be selected for free.

As for the reason for the price increase, Tesla's sales consultant told reporters that it was due to the increase in the price of raw materials.

The performance of the Chinese market has slowed

According to a report released by PricewaterhouseCoopers a few days ago, Chinese consumers are currently less willing to pay for autonomous driving. "In the short term, consumers' habits and user stickiness for functions such as autonomous driving have not yet been established, but car companies need to deploy high R&D expenses and input costs in advance, and how to grasp the rhythm during the pressure period has become an important topic. ”

The reporter noticed that since the second half of 2023, the news that Tesla has promoted its FSD (Full-Self Driving, an autonomous driving system developed by Tesla) into the Chinese market has been very loud. According to Tesla's official website, the enhanced version of self-driving costs 32,000 yuan, while the full self-driving requires 64,000 yuan. However, in the eyes of industry insiders, even if Tesla's FSD enters the Chinese market, it is still facing greater pressure.

Zhang Xiang told reporters that the speed at which Chinese car companies launch new models is getting faster and faster, and the cycle of updating models is getting shorter and shorter, compared to Tesla's market performance in China. "At present, the self-driving technology is not mature, and if Tesla uses the self-driving technology as a marketing tool, it will not be able to really increase the sales of its products. ”

"As Tesla's autonomous driving technology, if FSD can be widely used in the domestic market, it will greatly enhance the competitiveness and attractiveness of Tesla's products. Jiang Han told reporters that the competition in China's new energy vehicle market is becoming increasingly fierce, and domestic car companies have made significant progress in automatic driving and intelligence, which has constituted a certain competitive pressure on Tesla. "Tesla needs to take a hard look at its own shortcomings and adjust its strategy in a timely manner to adapt to changes in the market. ”

In fact, Tesla is still continuing to improve its technological innovation. Musk said in an internal letter a few days ago that Tesla is currently developing the most revolutionary technologies in the fields of automobiles, energy and artificial intelligence, and the determination of employees will have a huge impact on the company's efforts to achieve this goal. However, Musk also admitted: "This is still a difficult job for employees who stay at Tesla." ”

This is not the first time Musk has disclosed Tesla's news about innovation. A few days ago, Musk announced on the X platform that in August this year, Tesla will release driverless taxi (Robotaxi) products. Affected by the news, Tesla's stock price rose 5% on the day.

In addition to the original electric vehicle business, the energy storage business may become a new growth point for Tesla. According to relevant media reports, Tesla's Shanghai energy storage gigafactory is scheduled to start construction in May 2024 and complete mass production in the first quarter of 2025, which is also Tesla's first energy storage gigafactory project outside the United States. According to relevant plans, the Shanghai Energy Storage Gigafactory will produce ultra-large commercial energy storage battery Megapack.

The contribution of the energy storage business to Tesla's performance will also begin to emerge in 2023. According to Tesla's 2023 financial report, the installed capacity of the energy storage business reached 14.7GWh, more than double that of 2022, and the profit of the company's energy power generation and energy storage business almost quadrupled in 2023.