Tesla will slash global headcount by more than 10 per cent, Elon Musk wrote in an email to staff, as the carmaker grapples with a slowdown in electric vehicle demand.
The chief executive officer cited duplication of roles and the need to reduce cost as reasons for the cuts in the memo seen by Bloomberg News. If the cuts apply companywide, the dismissal would amount to more than 14,000 employees.
Tesla reported disastrous vehicle deliveries early this month, missing expectations by a wide margin and posting its first quarterly decline in four years. Several analysts are bracing for the EV maker’s sales to potentially shrink for the year, citing slow output of its newest model – the Cybertruck – and a lull in new products until the company starts producing a next-generation vehicle late next year.
“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 wrote in the email. “As part of this effort, we have done a thorough review of the organisation and made the difficult decision to reduce our headcount by more than 10 per cent globally. There is nothing I hate more, but it must be done.”
Tesla ended last year with 140,473 employees, almost double its total three years earlier. It’s been ramping up output at two plants – one in Austin, and the other outside Berlin – that started cranking out Model Y sport utility vehicles in early 2022. The company started slashing prices across its line-up as those facilities reached higher volumes.
“Over the years, we have grown rapidly with multiple factories scaling around the globe,” Musk wrote in the mail, which was reported earlier Monday by the blog Electrek. “With this rapid growth there has been duplication of roles and job functions in certain areas.”
Tesla shares have slumped 31 per cent this year, ranking among the worst performers in the S&P 500 Index. The stock slipped as much as 1.2 per cent before the start of regular trading.
Tesla staff have been fearing potential job cuts since early this year, when managers were asked to affirm whether each of their employees’ positions is critical. Some salaried employees also were told late last year that the company wasn’t going to be offering merit-based equity awards as part of annual performance reviews.
“We just have to chase down every penny possible,” chief financial officer Vaibhav Taneja said during Tesla’s most recent earnings call on January 24. “We have a strong team which is hyper-focused on this.”
The EV slowdown Tesla has felt of late has been widespread. China’s BYD Co. delivered just 300,114 battery-electric vehicles in the first quarter, down 43 per cent from the final three months of last year, when it briefly pulled ahead as the world’s top EV seller. Manufacturers including Volkswagen, General Motors and Ford have delayed, dialled back or altogether scrapped EV projects as consumers balk at still-high prices and a dearth of charging stations.
In its most recent major workforce reduction, Tesla eliminated about 10 per cent of salaried workers in mid-2022. – Bloomberg
