Tesla, the world’s largest automaker by market value, is planning to reduce its global workforce by over 10%, affecting approximately 14,000 of its 140,473 employees. This decision comes as the company grapples with a decline in vehicle deliveries and increasing competition from Chinese EV companies and American car manufacturers offering EV variants at lower prices.
The layoffs are expected to affect approximately 14,000 of Tesla’s 140,473 employees, with the exact teams facing layoffs still uncertain.In addition to the layoffs, Tesla is also experiencing the departure of high-level executives. Drew Baglino, former SVP of Powertrain and Energy, and Rohan Patel, who headed policy at Tesla, have both confirmed their departures.
Musk thanked them for their service and stated that the company needs to reorganize and streamline every five years for the next phase of growth.The layoffs and executive departures come amidst a challenging period for Tesla, with a year-on-year decline in vehicle deliveries and increasing competition from Chinese EV companies and American car manufacturers offering EV variants at lower prices. Tesla has blamed geopolitical factors, including the Red Sea conflict and an arson attack at Gigafactory Berlin, for its performance in its quarterly update on April 2. Despite these challenges, Tesla produced 433,371 units in total this quarter and delivered 386,810, albeit still short of the 422,875 vehicles delivered in the first quarter of last year.
The company had previously laid off 4% of its workforce in New York in February last year as part of a performance review cycle and before a union campaign was to be launched by its employees. Tesla has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world’s largest auto market, are rolling out cheaper models. The company is looking to shore up its margins, which have been dented by repeated price cuts. It recorded a gross profit margin of 17.6% in the fourth quarter, the lowest in more than four years.
Tesla’s recent developments mark a series of setbacks for the EV manufacturer. The company fell short of delivery estimates preceding its quarterly earnings on April 23rd, and predicted a deceleration in sales growth in January, attributing it to manufacturing challenges surrounding its upcoming vehicle generation. Tesla’s CEO, Elon Musk, expressed his displeasure about the situation, stating that the layoffs will enable Tesla to be lean, innovative, and hungry for the next growth phase cycle.
In conclusion, Tesla’s decision to lay off over 10% of its workforce and the departure of top executives are significant developments that highlight the challenges facing the company in a highly competitive market. The layoffs are expected to affect approximately 14,000 of Tesla’s 140,473 employees, with the exact teams facing layoffs still uncertain.
The company is looking to reorganize and streamline for the next phase of growth, as it braces for a slowdown in 2024 and strives to shore up its margins and increase productivity