Tesla told staff it is laying off more than 10 per cent of its global workforce, an internal memo seen by Reuters on Monday shows, as it grapples with falling sales and an intensifying price war for electric vehicles (EVs).
In response to commentary on the news on X, Tesla CEO Elon Musk posted: "About every five years, we need to reorganize and streamline the company for the next phase of growth."
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Musk last announced a round of job cuts in 2022, after telling executives he had a "super bad feeling" about the economy. Tesla never outlined how many jobs it cut in 2022, but its employee headcount has risen from around 100,000 in late 2021 to over 140,000 in late 2023, according to SEC filings.
Monday's dismissals were effective immediately, according to a copy of the email sent to laid off employees seen by Reuters.
Also on Monday, Tesla's senior vice president Drew Baglino, in charge of battery development, and Rohan Patel, vice-president for public policy and business development, both announced their exits from the company on X.
Baglino was one of four members in Tesla's leadership team listed on the company's investor relations website that includes CEO Elon Musk. Musk thanked both executives for their work in a response to their respective notes on X.
Scott Acheychek, CEO of Rex Shares - who manage ETFs with high exposure to Tesla stock - described the headcount reductions as strategic, pointing to Tesla's overall year-on-year headcount increase as a sign that the carmaker was still in a phase of growth.
Still, Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, deemed the departures of the senior executives as "the larger negative signal today" that Tesla's growth was in trouble.
Tesla shared were down 2.6 per cent in midday trading on Monday, with other EV makers such as Rivian Automotive, Lucid Group and VinFast Auto also trading between 2 per cent and 7.4 per cent lower.
"As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity," Musk said in the memo sent to all staff.
"As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10 per cent globally," it said.
Reuters saw an email sent to at least three U.S. employees notifying them their dismissal was effective immediately.
Tesla did not immediately respond to a request for comment.
The layoffs follow an exclusive Reuters report on April 5 that Tesla had canceled a long-promised inexpensive car, expected to cost $25,000, that investors have been counting on to drive mass-market growth. Musk had said the car, known as the Model 2, would start production in late 2025.
Shortly after the story published, Musk posted "Reuters is lying" on his social media site X, without detailing any inaccuracies. He hasn't commented on the car since, leaving investors and analysts to speculate on its future.
Reuters also reported on April 5 that Tesla would shift its focus to self-driving robotaxis built on the same small-car platform. Musk posted on X that evening: "Tesla Robotaxi unveil on 8/8," with no further details.
Tesla could be years away from releasing a fully autonomous vehicle with regulatory approval, according to experts in self-driving cars and regulation.
Tesla shares have fallen about 33 per cenr so far this year, underperforming legacy automakers such as Toyota Motor and General Motors, whose shares have rallied 45 per cent and about 20% respectively thanks to a slow consumer transition away from traditional internal combustion engine vehicles.
Energy major BP has also cut more than a tenth of the workforce in its EV charging business after a bet on rapid growth in commercial EV fleets didn't pay off, Reuters reported on Monday, underscoring the broader impact of slowing EV demand.
A newly elected works council of labor representatives at Tesla's German plant was not informed or consulted ahead of the announcement to staff, said Dirk Schulze, head of the IG Metall union in the region.
"It is the legal obligation of management not only to inform the works council but to consult with it on how jobs can be secured," Schulze said.
Analysts from Gartner and Hargreaves Lansdown said the cuts were a sign of cost pressures as the carmaker invests in new models and artificial intelligence.
Tesla reported this month that its global vehicle deliveries in the first quarter fell for the first time in nearly four years, as price cuts failed to stir demand.
The EV maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world's largest auto market, are rolling out cheaper models.
The company is looking to shore up its margins, which have been dented by repeated price cuts, especially in China where it faces stiff competition from local rivals including market leader BYD, which briefly overtook the U.S. company as the world's largest EV maker in the fourth quarter, and new entrant Xiaomi.
It is also gearing up to start sales in India, the world's third-largest auto market, this year, producing cars in Germany for export to India and scouting locations for showrooms and service hubs in major cities.
Tesla recorded a gross profit margin of 17.6 per cent in the fourth quarter, the lowest in more than four years.
It had laid off 4% of its workforce in New York in February last year as part of a performance review cycle and before a union campaign was to be launched by its employees.
Tech publication Electrek first reported the latest job cuts.
(Reporting by Yuvraj Malik in Bengaluru, Victoria Waldersee in Berlin, Zhang Yan in Shanghai and Hyunjoo Jin in San Francisco; Additional reporting by Zaheer Kachwala, and Akash Sriram; Editing by Mark Potter, David Holmes and Chizu Nomiyama)
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