Tesla towards a 10 per cent cut in employees

Tesla is preparing for a wave of layoffs, amounting to more than 10 per cent of its workforce. This was reported today by Electrek, citing an internal memo, at a time when the famous carmaker is facing weak demand for its electric vehicles in a highly competitive market. According to the latest annual report, the world's largest carmaker by market value had 140,473 employees globally as of December 2023. The announced cuts could affect some 14-15,000 workers.

Elon Musk cited "duplication of job roles and functions in some areas" as the reason for the cuts, Electrek said, citing an email the CEO allegedly sent to staff. Tesla - which will release its quarterly earnings on 23 April - reported a drop in vehicle deliveries in the first quarter (well below market expectations), the first in almost four years, with a substantial increase in inventory and a stockpile of more than 45,000 vehicles in three months. In the coming months, production could therefore be reduced to clear stock, as already decided in Shanghai and as will soon be the case in Austin, where a reduction in working hours has been announced on the Cybertruck, the electric pick-up truck on which deliveries are slow due to an unspecified mechanical problem.
In the meantime, the company has also shelved plans to produce an economy car, abandoning one of Musk's longest-standing goals of making more affordable electric vehicles. Several analysts are bracing for a potential downturn in sales not only because of the sluggishness on the Cybertruck but also 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 that we examine every aspect of the company to reduce costs and increase productivity," Musk wrote in the email. "As part of this effort, we have conducted a thorough review of the organisation and made the difficult decision to reduce our workforce by more than 10 per cent globally.

The company is preparing for a slowdown in 2024. Reasons include a slow pace in renewing its obsolete models as high interest rates have weakened demand, while rivals in China - the world's largest car market - are launching cheaper models. The company posted a gross profit margin of 17.6 per cent in the fourth quarter, the lowest in four years, and ended last year with 140,473 employees, almost double the total three years earlier. It also increased production at two plants - one in Austin, Texas, and the other outside Berlin - which began producing the Model Y in early 2022, but began cutting prices across its entire range when the increase in volumes was not borne by the market. Tesla shares have plummeted 30% this year, ranking among the worst performers in the S&P 500 index.

Tesla had previously laid off 4% of its workforce in New York in February last year.