Tesla will lay off greater than 10% of its global workforce, in response to a memo sent to employees by CEO Elon Musk.
The corporate’s shares closed down greater than 5% on Monday.
“As we prepare the company for our next phase of growth, it is incredibly necessary to have a look at every aspect of the company for cost reductions and increasing productivity,” Musk said in the memo obtained by CNBC.
“As part of this effort, now we have done a radical review of the organization and made the difficult decision to scale back our headcount by greater than 10% globally,” the memo said.
The memo was first reported by Electrek.
Tesla had 140,473 employees as of December 2023.
Tesla shares have taken a bruising in recent months, falling 31% yr up to now. While electric vehicle sales are still gaining popularity worldwide, their sales growth rate has slowed especially for Tesla. The corporate now faces more competition than ever.
To finish 2023, China’s BYD temporarily dethroned Tesla as the world’s top EV maker. Chinese smartphone company Xiaomi in March said it could sell its first electric automobile for a lot lower than Tesla’s Model 3.
Musk has previously recognized that China, home to a big Tesla factory, may additionally house the company’s strongest competition. “There’s rather a lot of people who find themselves on the market who think that the top 10 automobile corporations are going to be Tesla followed by nine Chinese automobile corporations. I feel they won’t be improper,” Musk said in November.
Some would-be Tesla customers at the moment are skipping the brand owing to Musk’s incendiary rhetoric
Earlier this month, Tesla reported its first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted production extraneous of demand — first-quarter deliveries fell by 8.5% on the yr to 386,810 in the first quarter, with output down 1.7% from a yr earlier and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter.
More recently, Tesla trimmed the subscription price of its premium driver assistance system, marketed as its Full Self-Driving or FSD option, for U.S. customers. The move was sharply at odds with Musk’s previous pledges that the FSD fee would only bulk up as Tesla added features and functionality to the system. Despite the brand name, the system doesn’t make Tesla vehicles self-driving and requires a driver attentive to the road, able to steer or brake at any time.
But the squeeze on the company’s operating margin — which got here in at 8.2% in the fourth quarter, down from 16% a yr earlier — stays, and Tesla has warned investors to brace that vehicle volume growth this yr “could also be notably lower” than the rate logged in 2023, saying it’s “currently between two major growth waves.”
Logistical challenges exacerbated Tesla’s problems this yr. The corporate’s component supply was a casualty of disruptions attributable to Yemeni Houthi maritime attacks in the Red Sea, while the automaker’s gigafactory near Berlin was forced to briefly suspend production on account of suspected arson at a close-by electricity substation.
Tesla is scheduled to report first-quarter financial results on April 23.
Here’s the full memo from Musk (transcribed by CNBC):
Over the years, now we have grown rapidly with multiple factories scaling around the globe. With this rapid growth there was duplication of roles and job functions in certain areas. As we prepare the company for our next phase of growth, it is incredibly necessary to have a look at every aspect of the company for cost reductions and increasing productivity.
As part of this effort, now we have done a radical review of the organization and made the difficult decision to scale back our headcount by greater than 10% globally. There may be nothing I hate more, nevertheless it should be done. This may enable us to be lean, modern and hungry for the next growth phase cycle.
I would really like to thank everyone who’s departing Tesla for his or her labor over the years. I’m deeply grateful to your many contributions to our mission and we wish you well in your future opportunities. It is extremely difficult to say goodbye.
For those remaining, I would really like to thanks upfront for the difficult job that continues to be ahead. We’re developing some of the most revolutionary technologies in auto, energy and artificial intelligence. As we prepare the company for the next phase of growth, your resolve will make an enormous difference in getting us there.
Thanks,
Elon
Correction: Tesla’s operating margin got here in at 8.2% in the fourth quarter, down from 16% a yr earlier. An earlier version misstated a time element.