Tesla It will lay off more than 10% of its global workforce, according to a memo sent by CEO Elon Musk to employees.
The company's shares were down 4% Monday afternoon.
“As we prepare the company for the next phase of growth, it is extremely important that we look at every aspect 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 comprehensive review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the memo said.
The memo was first reported by Electrek.
Tesla had 140,473 employees as of December 2023.
Tesla shares have been bruised in recent months, down 31% year to date. While electric vehicle sales are still gaining popularity around the world, their sales growth rate has slowed, especially for Tesla. The company now faces more competition than ever before.
By the end of 2023, China's BYD has temporarily dethroned Tesla as the world's largest electric car maker. Chinese smartphone maker Xiaomi said in March that it would sell its first electric car at a price much lower than the Tesla Model 3.
Musk has previously recognized that China, home to a large Tesla factory, may also host the company's strongest competition. “There are a lot of people who think the top 10 car companies will be Tesla followed by nine Chinese car companies,” Musk said in November. “I think they may not be wrong.”
Some potential Tesla customers are now bypassing the brand due to Musk's inflammatory rhetoric
Earlier this month, Tesla reported its first annual decline in vehicle deliveries since 2020, when the COVID-19 pandemic disrupted out-of-order production — and first-quarter deliveries fell 8.5% year over year to 386,810 in First quarter, with lower production. Down 1.7% from the previous year and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter.
More recently, Tesla reduced the subscription price for its premium driver-assistance system, which is marketed as a Full Self-Driving or FSD option, for customers in the United States. The move was in sharp contrast to Musk's previous pledges that FSD fees would only increase as Tesla added features and functionality to the system. Despite the brand name, the system does not make Tesla cars self-driving and requires a driver to be attentive to the road, ready to steer or brake at any time.
But pressure on the company's operating margin — which reached 8.2% in the fourth quarter, down from 16% a year earlier — remains, and Tesla has warned investors that vehicle volume growth this year could be “significantly lower” than on record. in 2023, saying it is “currently between two major growth waves.”
Logistical challenges have exacerbated Tesla's problems this year. The company's component supply has been a victim of disruptions caused by Yemeni Houthi naval attacks in the Red Sea, while the carmaker's massive factory near Berlin was forced to briefly suspend production due to suspected arson at a nearby electricity substation.
Tesla is scheduled to announce its first-quarter financial results on April 23.
Here's the full memo from Musk (cited by CNBC):
Over the years, we have achieved rapid growth with the expansion of many factories around the world. With this rapid growth, there was a duplication of job roles and tasks in certain areas. As we prepare the company for the next stage of growth, it is extremely important to consider every aspect of the company to reduce costs and increase productivity.
As part of this effort, we undertook a comprehensive review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it has to be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.
I would like to thank everyone who is leaving Tesla for their hard work over the years. I am deeply grateful for your many contributions to our mission and wish you well in your future opportunities. It's so hard to say goodbye.
As for those remaining, I would like to thank you in advance for the difficult task that still lies ahead. We are developing some of the most revolutionary technologies in automotive, energy and artificial intelligence. As we prepare the company for the next stage of growth, your determination will make a huge difference in getting us there.
Thanks,
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Correction: Tesla's operating margin reached 8.2% in the fourth quarter, down from 16% a year earlier. An earlier version made a mistake in the time element.
