Tesla The company will lay off more than 10% of its global workforce, according to a memo sent to employees by Chief Executive Elon Musk.
The company’s shares fell 3% on Monday morning.
“As we prepare for the next phase of the company’s growth, it is extremely important to look at all aspects of the company to reduce costs and increase productivity,” Musk said in the memo obtained by CNBC.
“As part of this effort, we conducted a thorough review of the organization and made the difficult decision to reduce our global workforce by more than 10%,” the memo said.
This memorandum was first issued by erektrek.
As of December 2023, Tesla had 140,473 employees.
Tesla shares have taken a beating in recent months, down 31% year to date. While electric vehicle sales remain popular around the world, sales growth has slowed, especially for Tesla. The company now faces more competition than ever before.
By the end of 2023, China’s BYD will temporarily replace Tesla as the world’s largest electric vehicle manufacturer. Chinese smartphone company Xiaomi said in March that its first electric car would be priced much lower than the Tesla Model 3.
Musk has previously recognized that China, home to Tesla’s massive factory, may also be the company’s strongest competitor. “A lot of people think the top ten car companies will be Tesla, followed by the nine Chinese car companies. I think they’re probably not wrong,” Musk said in November.
Some potential Tesla customers are now skipping the brand due to Musk’s inflammatory comments
Earlier this month, Tesla reported its first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted production unrelated to demand – first-quarter deliveries fell year-over-year 8.5% to 386,810 units, with production down 1.7%, up 12.5% year-on-year and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter.
Recently, Tesla reduced subscription prices for U.S. customers for its advanced driver assistance system, which it markets as a Full Self-Driving, or FSD, option. The move is a sharp departure from Musk’s previous pledge that FSD fees would only increase as Tesla added features and functionality to the system. Despite the brand name, the system does not allow Tesla vehicles to drive autonomously, but instead requires the driver to pay attention to the road and be ready to swerve or brake at any time.
But the squeeze on the company’s operating margins remains – operating margins were 8.2% in the fourth quarter, down from 16% in the same period last year, and Tesla warned investors to be prepared that car sales growth this year “could be significant.” lower than the same period last year. The ratio was recorded in 2023, saying it is “currently between two major growth waves.”
Logistics challenges have compounded Tesla’s problems this year. The company’s parts supply has been disrupted by maritime attacks by Yemen’s Houthi rebels in the Red Sea, while the carmaker’s gigafactory near Berlin was forced to temporarily halt production due to suspected arson at a nearby power substation.
Tesla is scheduled to release first-quarter financial results on April 23.
Here’s Musk’s full memo (transcribed by CNBC):
Over the years, we have grown rapidly and opened several factories around the world. With this rapid growth comes duplication of roles and job functions in some areas. As we prepare our company for its next phase of growth, it is extremely important to look at all aspects of our company to reduce costs and increase productivity.
As part of this effort, we conducted a thorough review of the organization and made the difficult decision to reduce our global headcount by more than 10%. There’s nothing I hate more than this, but it has to be done. This will enable us to be lean, innovative and eager for the next cycle of growth stages.
I want to thank everyone who has left Tesla for their hard work over the years. I am deeply grateful for your many contributions to our mission and wish you all the best in the future. It’s hard to say goodbye.
To the rest of you, I want to thank you in advance for the hard work you face. We are developing some of the most revolutionary technologies in automotive, energy and artificial intelligence. As we prepare for the next phase of our company’s growth, your determination will have a huge impact on how we get there.
Thanks,
Elon
Revised: Tesla’s fourth-quarter operating margin was 8.2%, down from 16% in the same period last year. An earlier version incorrectly stated the time element.
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