Signs of turmoil at Tesla Inc. deepened on Monday after the electric car company told employees it would lay off more than 10% of its workforce to cut costs and two executives resigned.
The approximately 14,000 job cuts come as the company faces increased competition and declining sales. The leadership changes and layoffs are a reminder of Tesla CEO Elon Musk's unpredictability at a critical time for the company.
Mr. Musk has not disclosed any plans to reverse the decline in car sales, and he is more concerned about long-term projects like self-driving taxis than new models that help Tesla compete with incumbent automakers and the cars they introduce. Seems to be focused on business. A new rival from China.
“As we prepare our company for its next phase of growth, it is critical that we look at all aspects of our company to reduce costs and increase productivity,” Musk told employees in an email Monday morning. A copy was confirmed. According to the New York Times.
“There's nothing I hate more, but it has to be done,” he wrote.
Hours after that email, the company announced that Drew Baglino, the executive vice president who played a major role in helping the company grow from a start-up to a leading electric vehicle manufacturer, had resigned.
“Yesterday, I made the difficult decision to leave Tesla after 18 years,” Baglino said in a post on social media site X. Mr. Baglino is one of only three managers besides Mr. Musk listed as chief executive officer on the company's website. His longevity was unusual for the company, which is known for its high turnover of managers.
Gary Black, managing partner at investment firm Future Fund, said Mr. Baglino could be responsible for some of Tesla's recent problems. “Someone has to take on board the sharp slowdown in volume growth, inventory near record highs, and declining profit margins, and that wasn't Elon,” Black told X.
Tesla also appears to be missing management's key to winning regulatory approval for its self-driving technology. Rohan Patel, a former aide to President Barack Obama and Tesla's head of policy and business development, has tacitly confirmed reports that he is resigning. In a post on X, Patel thanked his colleagues and Musk for “the past eight years at Tesla.”
“My plans are to be a recess monitor for my second-grade daughter, practice my violin, go to as many bucket-list sporting events, and take my patient wife on long trips,” Patel says. said.
Investors often welcome layoffs because they can lead to higher profits. But that wasn't the case on Monday, with Tesla shares ending the day down more than 5%.
Tesla regularly retrenches its workforce and fires employees deemed underperforming by performance managers, but the number is smaller than usual. “This is something Elon and Tesla have done consistently throughout their careers,” said Scott, CEO of REX Shares, which provides funds that investors use to bet on or against Tesla stock. Aceicek said. “10% is a pretty big number,” Acejcek added.
Musk's email to employees was first reported by online news site Eretrek and German financial newspaper Handelsblatt.
Musk did not say where the cuts would be made. Most of Tesla's employees are based at four large auto factories in Fremont, California, Austin, Texas, Shanghai and near Berlin. Tesla also has a factory in Buffalo that makes charging equipment and a factory near Reno, Nevada that makes batteries.
The layoffs could aid the United Auto Workers union's efforts to organize Tesla workers in the United States. A company's employees may be more open to unions if they believe that representation will provide them with greater job security. Workers at a Volkswagen plant in Tennessee will vote on joining the UAW this week, and Mercedes-Benz workers in Alabama will vote next month.
Mr. Musk's many other businesses and tendency to make polarizing political statements have raised questions about his focus on running Tesla. Wall Street has grown increasingly concerned about the company, with Tesla's stock losing about a third of its value this year.
Many investors believe Tesla could revive sluggish sales by launching a car that costs about $25,000 as early as next year, increasing the number of people who can afford its cars and increasing the number of people who are already buying electric cars. They expressed hope that it would counter competition from Chinese companies that sell the products. You can buy a car for just half the price.
Musk cast doubt on those plans earlier this month when he announced that Tesla would unveil a robotaxi in August. Self-driving taxis are considered difficult to achieve. One reason for this is that even the most advanced systems available today sometimes make glaring mistakes. Additionally, Tesla would need approval from federal and state regulators to put such taxis on the road.
Tesla reported a decline in sales this month, which caught investors off guard. The company announced that it delivered 387,000 vehicles worldwide in the first quarter, an 8.5% decrease from the same period last year. This is the first time Tesla's quarterly sales have declined from a year earlier since the pandemic began in 2020.
The company has slashed prices through 2023 to boost demand, but this has reduced Tesla's profits from each car. Last week, Tesla cut the price of its cutting-edge driver-assistance software from $199 to $99 per month. But price cuts appear to be losing their effectiveness. Tesla will announce its first quarter results on April 23rd.
Rivals such as China's BYD, Germany's BMW, and South Korea's Kia Motors and Hyundai Motors have also reported increases in electric vehicle sales over the same period, and a slowdown in overall demand for battery-powered models is only part of Tesla's problem. This suggests that this is not the only explanation.
The established company is closing the gap with Tesla on battery technology, building new assembly lines to cut costs through mass production. Honda plans to begin producing electric vehicles at its Marysville, Ohio, factory next year.
Jose Muñoz, president and global chief operating officer of Hyundai Motor Company, said in an interview last month that Hyundai will begin producing electric vehicles in October at a new plant in Georgia. Hyundai also plans to let customers buy cars on Amazon, an answer to Tesla's online car sales practices.
Muñoz said customers are willing to pay more for a Hyundai electric vehicle than a comparable Tesla. “Initially, Tesla was premium,” he said. “Now we’re premium.””
Jason Kalyan and melissa eddy Contributed to the report.