Tesla layoffs send stock price down amid concerns about weak demand | Wilnesh News

Shares of companies typically rise after announcing layoffs as Wall Street rallies around the prospect of improved efficiencies and profits.

But that’s not how investors treat the latest news Tesla. The electric car maker’s shares fell nearly 6% on Monday and another 3.5% on Tuesday to their lowest level since April last year after Chief Executive Elon Musk told employees the company would cut more than 10% of its global workforce. .

“There’s nothing I hate more than this, but it has to be done,” Musk wrote in a memo about the layoffs.

Tesla shares have been spiraling since the calendar turned, plunging 29% in the first quarter, the worst period since late 2022 and the company’s third-largest decline since its initial public offering in 2010. The stock is down 60% from its peak reached in November 2021.

Previous layoffs have not caused such market pessimism. In 2018, when Tesla laid off 9% of its workforce, its stock price rose more than 3%. The stock plunged 9% in 2022 on initial reports of layoffs, but recovered after Musk made clarifying comments days later.

Tesla today finds itself in a different predicament.

Earlier this month, the automaker reported a decline in first-quarter vehicle deliveries, its first annual decline since the coronavirus pandemic disrupted production in 2020. In China, Tesla faces fierce competition from domestic electric car makers such as BYD and mobile phone maker Xiaomi.

The layoffs come after Tesla had been cutting prices and offering other buyer incentives, which could lead to lower profit margins. Last week, the company said it would cut subscription prices for its Advanced Driver Assistance System (FSD) in half for U.S. customers.

according to Latest available data Kelley Blue Book shows that thanks to a “strong incentive program”, electric vehicle prices fell 9.7% year-on-year in March. Tesla prices bottomed in January, although prices rose slightly in March.

Monday’s sell-off wasn’t just about layoffs, with Tesla top executives Drew Baglino and Rohan Patel announcing they were leaving the company. Baglino has worked with Tesla since his early years, starting in 2006 as a firmware and electrical engineer.

Musk said in the layoff memo that “it is extremely important to look at all aspects of the company to reduce costs and increase productivity.” However, analysts and investors see demand issues,

Eighteen analysts cut their price targets on Tesla stock this month, but none became more bullish, according to FactSet data.

“Just when you thought the Tesla news couldn’t get any worse, we have the past few… “We now have questions about whether they will produce low-cost Model 2 and FSD price cuts. “

Tesla began acknowledging earlier this year that growth in 2024 could be “significantly lower” than the year before. The company said it is currently between two waves of electric vehicle growth but did not issue guidance for 2024.

In addition to increased competition and dynamism in the EV industry, Musk also brings unpredictability.

The billionaire faces scrutiny from multiple regulators over his dealings at X, formerly known as Twitter, and shareholders have raised concerns about whether he is paying enough attention to Tesla. Musk serves as the CEO of SpaceX, owns X, founded the artificial intelligence company xAI, and runs the brain-computer interface company Neuralink and the tunnel company The Boring Co.

At the same time, he has repeatedly disparaged undocumented immigrants, strongly opposed corporate diversity initiatives, and retweeted false conspiracy theories.

Musk has Said before He didn’t miss any “important” meetings at Tesla, nor was he “completely absent from action.”

Tesla did not respond to CNBC’s request for comment.