Tesla’s Layoffs: Elon Musk’s Memo and Company Challenges

The American company revealed earlier this month that car deliveries fell for the first time in a year since 2020.

TFD – Dive into the details of Tesla’s recent layoffs, disclosed in a memo by Elon Musk, amidst challenges like stock decline and workforce reduction. Explore how Tesla is navigating these hurdles and preparing for the next phase of growth.

Tesla CEO Elon Musk wrote a note to staff members stating that the company will be laying off over 10% of its global workforce.

Early on Monday morning, the company’s shares were down 3%.

In the message that CNBC was able to receive, Musk stated, “Looking at every aspect of the company for cost reductions and increasing productivity is extremely important as we prepare the company for our next phase of growth.”

The message stated, “We have made the difficult decision to reduce our headcount by more than 10% globally as part of this effort after doing a thorough review of the organization.”

Electrok was the first to report on the memo.

As of December 2023, 140,473 people were employed at Tesla.

Tesla’s stock has suffered recently, down 31% so far this year. Although sales of electric vehicles are still growing in popularity globally, particularly for Tesla, this growth rate has halted. There is now more competition for the company than ever.

By the end of 2023, BYD of China briefly overthrew Tesla as the leading EV manufacturer globally. In March, the Chinese smartphone maker Xiaomi said that its first electric vehicle will be sold for significantly less than Tesla’s Model 3.

Musk has acknowledged in the past that the company’s biggest competitors might reside in China, the location of a sizable Tesla factory. Many people believe that Tesla will rank among the top ten automakers, with nine Chinese automakers following behind. “I believe they may not be incorrect,” Musk stated in November.

Due in part to Musk’s caustic remarks, some prospective Tesla buyers are now avoiding the company. Production reached 386,810 in the first quarter, down 1.7% from a year earlier and 12.5% sequentially despite customer discounts and incentives being offered throughout the quarter.

Tesla announced earlier this month that first-quarter vehicle deliveries fell by 8.5% on the year to 386,810, with output down 1.7% from a year earlier and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter. This is the company’s first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted production extraneous to demand.

Recently, Tesla reduced the annual membership cost for its top-tier driver assistance program, known as Full Self-Driving, or FSD, for customers in the United States. Musk had previously promised that the FSD price would only increase as Tesla added features and capability to the system, so this action was a stark contrast to his earlier promises. Despite the brand name, the system does not make Tesla vehicles self-driving and requires a driver attentive to the road, ready to steer or brake at any time.

However, the pressure on the business’s operating margin, which dropped to 8.2% in the fourth quarter from 16% in the previous year, is still present. Tesla has alerted investors to the possibility that this year’s vehicle volume growth “may be notably lower” than that of 2023 because it is “currently between two major growth waves.”

This year, logistical difficulties made Tesla’s issues worse. Due to suspected arson at a nearby energy substation, the automaker’s gigafactory outside Berlin was forced to temporarily cease production, while the company’s component supply suffered due to disruptions caused by Yemeni Houthi maritime attacks in the Red Sea.

On April 23, Tesla is expected to release its first-quarter financial results.

The complete Musk memo, as transcribed by CNBC, is available here:

We have expanded quickly over the years, with several factories opening up around the world. There have been overlaps in some occupations and job functions as a result of this quick expansion. It is crucial that we examine every facet of the business for ways to cut costs and boost productivity as we get ready for the next stage of expansion.

We have thoroughly examined the company as part of this endeavor and have taken the tough choice to cut over 10% of our workforce worldwide. Nothing I detest more than this, but it has to be done. As a result, we will be able to enter the following growth phase cycle with agility, creativity, and hunger.

I want to express my gratitude to all of the leaving Tesla employees for their years of devoted labor. We wish you well in all of your future endeavors and are sincerely appreciative of your numerous contributions to our goal. It is really hard to say goodbye.

I want to thank everyone who is still here in advance for the challenging work that lies ahead of us. We are creating some of the most ground-breaking innovations in artificial intelligence, automotive technology, and energy. As we prepare the company for the next phase of growth, your resolve will make a huge difference in getting us there.

Regards,

Elon