Tesla is set to reduce its global workforce involved in electric vehicle production by over 10%, as disclosed in a memo first brought to light by Electrek. Elon Musk, the company’s billionaire owner, expressed deep regret over the decision in his communication with employees, emphasizing the necessity of the layoffs despite his personal distaste for them.
With a workforce numbering 140,473 globally as of December, according to the company’s latest annual report, this move marks a significant reduction.
Musk’s memo explained that a comprehensive review of the organization led to this tough decision, aimed at positioning Tesla to remain lean and innovative while gearing up for new phases of growth.
Reports from the BBC include accounts from a Tesla employee who found himself locked out of his company email, a fate shared by others who were also laid off.
Further changes at Tesla involve high-level departures; Andrew “Drew” Baglino, the senior vice president of Tesla’s powertrain and energy engineering since 2019, announced on X (formerly Twitter) his decision to leave after 18 years. Additionally, Rohan Patel, who has been prominent in public policy and business development at Tesla, also plans to exit. He credited Musk for the opportunities to lead major initiatives within the company.
These exits are viewed by some industry experts as indicators of broader challenges facing Tesla’s growth ambitions. Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, regards these as potentially more concerning than the job cuts themselves.
Market analysts from firms like Gartner and Hargreaves Lansdown interpret these layoffs as responses to rising cost pressures as Tesla invests in new models and artificial intelligence technologies.
Tesla is also facing challenges from outdated models and the impact of high interest rates which dampen consumer spending on expensive purchases. Additionally, competitive pressure from China’s growing market of inexpensive electric vehicles is intensifying.
The company’s upcoming quarterly earnings report is highly anticipated, especially after a noted drop in vehicle deliveries during the first quarter, marking a first in nearly four years and falling below market expectations.
Recent adjustments at Tesla include reduced production at its Shanghai Gigafactory and shorter shifts at the Austin plant, which handles the Cybertruck, reflecting the slowdown in electric vehicle demand.
Despite rumors to the contrary, Elon Musk recently refuted claims that Tesla is halting plans to develop an affordable car, underscoring his commitment to making cost-effective electric vehicles widely accessible.
In the wake of these announcements, Tesla’s stock experienced a slight decrease, down 0.8% in Monday’s premarket trading.
