The world’s biggest EV manufacturer has cut 10% of its global workforce, according to a weekend memo to staff.
Shocking News for Tesla Employees
In a memo to Tesla staff worldwide, CEO Elon Musk announced the company’s decision to lay off as much as 10% of its global workforce.
Staff Were Blindsided
The move, which was described as necessary to prepare the electric vehicle manufacturer for its “next phase,” left staff completely blindsided.
Employees Cut Off
Following their termination, some employees discovered they couldn’t access their online workspace or reach out to Tesla managers and colleagues, only to then receive the termination email in their inboxes
A Weekend Email
The email from Musk was circulated over the weekend and first reported by the news website Electrek.
A Fall From Grace?
Layoff news has come as Tesla reels from a significant sales decline and a temporary fall from grace as the world’s largest EV manufacturer.
In the fourth quarter of 2024, Chinese manufacturer BYD usurped its title, although Tesla later regained it in the first quarter of this year.
“A Difficult Decision”
“We have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the email read.
Reductions and Increases
Musk also attributed the change to a need for “cost reductions and increasing productivity,” though no references were made to Tesla’s flagging sales or any decrease in consumer demand.
“It Must Be Done,” Musk Says
Musk’s email continued, “There is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase cycle.”
Approximately 14,000 Job Losses
According to the company’s last annual report in December, Tesla’s global employees numbered 140,473, meaning that approximately 14,000 people in various countries have lost their jobs.
Onboarding, Offboarding
Many of these employees were let go just 1 to 6 months after initially being hired. Between 2022 and 2023, the company took on approximately as many new employees as it is now cutting off.
10% Inflation vs 10% Reduction
Tesla’s 2022 impact report showed just 127,000 employees. However, by December 2023, this number had inflated to 140,473 according to CNBC, something which Musk acknowledged in his memo.
Duplication of Roles
“Over the years, we have grown rapidly with multiple factories scaling around the globe,” he added. “With this rapid growth, there has been duplication of roles and job functions in certain areas.”
Demand for EV’s Drops
Inflation and high-interest rates have driven down demand for EVs significantly in the last year. This has affected all EV manufacturers, but with Tesla in the spotlight more than any other manufacturer, its impact on the company has been most noticeable.
China Manufacturing Has an Effect
Manufacturers in China have also had a cooling effect on Tesla’s sales, as they are able to produce models more cheaply, thus flooding the market with more affordable models for consumers.
Quarterly Delivery Report
According to Tesla’s quarterly delivery report, the company saw its first drop in sales since the beginning of the Covid-19 pandemic in 2020.
In March, Tesla reduced factory production in Shanghai and cut shifts on their Austin production line.
Significant Underdelivery
The report read, “In the first quarter, we produced over 433,000 vehicles and delivered approximately 387,000 vehicles.”
Myriad of Reasons for Sales Decline
In the same report, the company attributed its underdelivery to “the early phase of the production ramp of the updated Model 3″ in California, shipping diversions in the Red Sea, and an arson incident at its factory in Berlin.
Industry Experts Suggest Otherwise
However, some industry experts have questioned Musk’s claims that the layoffs are the result of growth preparation, including Gene Munster, a managing partner at Deepwater Asset Management, a fund manager for “transformative technologies and innovators across the growth spectrum,” according to the official website.
“They’re Adjusting the Business”
“If there were some massive rebound in the business, they wouldn’t be doing layoffs,” Munster told the Washington Post.
“They’re clearly adjusting the business for this remarkable slowdown in demand.”
Another Round
It is not the first time Tesla has announced significant staff layoffs in recent years. The company cut 7% of staff in 2019 and a further 10% of salaried staff in 2020.
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The post Elon Musk to Slash Tesla Workforce by 10% Globally first appeared on From Frugal to Free.
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