Tesla is set to reduce its global workforce by over 10%, according to an email sent by CEO Elon Musk to his employees. The change comes as the company contends with decreasing demand for electric vehicles. Musk attributed the job cuts to role duplication and a necessity to decrease expenses, as per a memo viewed by Bloomberg News. If applied across the entire company, over 14,000 staff could lose their jobs.
The auto manufacturer revealed disappointing vehicle deliveries earlier in the month, significantly failing to meet expectations and marking the first quarterly drop in four years. Several market analysts are additionally predicting a potential reduction in Tesla’s yearly sales, pointing out the slow production of its newest model, the Cybertruck, and a pause in new product releases till the commencement of next-generation vehicle production later on next year.
In preparation for the next phase of the company’s growth, cost cuttings and productivity improvement measures have been deemed essential by Musk. This includes the challenging decision of trimming more than 10% of the global workforce. Tesla finished the previous year with 140,473 staff members, nearly double its total from three years prior. The firm increased production at two manufacturing plants – one in Austin and another in Berlin – which began producing Model Y sport utility vehicles in early 2022. As production volumes at these facilities increased, Tesla began reducing prices across its model range.
Rapid growth and multiple operational factories around the world have led to replication of job roles and tasks, Musk commented in his email, berated by the blog Electrek. Tesla’s shares have plummeted 31% this year, making it one of the poorest performers in the S&P 500 Index. The stock fell by a further 1.2% prior to the commencement of regular trading.
Job security has been a concern for Tesla employees since earlier in the year when managers were asked to justify the criticality of each job role. In addition, certain salaried employees were informed late last year that annual performance reviews would not include merit-based equity awards.
“During Tesla’s latest earnings call on January 24, Chief Financial Officer Vaibhav Taneja emphasised the importance of pursuing every financial opportunity possible, stating the team’s rigorous focus on this objective. Tesla, along with other manufacturers, is experiencing a significant decline in electric vehicle (EV) sales. Chinese company BYD Co., for instance, only managed to deliver 300,114 battery-electric vehicles in the first quarter, seeing a drop of 43 per cent compared to the last quarter of the previous year when it briefly led the EV market globally. Other prominent manufacturers, such as Volkswagen, General Motors, and Ford, have had to either postpone, scale down or completely abandon their EV initiatives due to high cost for consumers and lack of charging facilities. In the most recent significant workforce cutback, Tesla let go of roughly 10 per cent of its salaried employees in the middle of 2022.” – As reported by Bloomberg.