Key Insights
- Tesla’s shares fell over 1% in premarket trading after the company revealed plans to lay off more than 10% of its global workforce
- In an internal memo, CEO Elon Musk stated that the layoffs are part of the company’s efforts to prepare for its “next phase of growth”
- The impending job cuts could result in the loss of over 14,000 positions
San Francisco, CA [MarketsXplora] – Tesla’s shares were down over 1% in premarket trading on Monday as the electric vehicle maker revealed plans to lay off more than 10% of its global workforce, according to an internal memo obtained by Reuters.
The company’s stock was down 1.2% in premarket deals at around 7:30 a.m. ET, as CEO Elon Musk warned employees that the company is facing a “code red situation” and needs to take drastic measures to prepare for its “next phase of growth.”
In the memo cited by Reuters and tech publication Electrek, Musk stated that Tesla has “done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally.” The company had 140,473 employees as of December 2023, which means the upcoming layoffs could result in the loss of over 14,000 jobs worldwide.
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“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.
The news of the impending job cuts comes as Tesla grapples with a range of challenges, including waning demand for electric vehicles, stiffening competition from Chinese automakers, and production issues that have impacted deliveries.
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Tesla’s first-quarter vehicle deliveries, which serve as a proxy for sales, fell 8.5% year-over-year to 386,810 units, with output down 1.7% from a year earlier and 12.5% sequentially. The company has also recently resorted to trimming the subscription price of its premium driver assistance system, the Full Self-Driving package, for U.S. customers, a move that contrasts with Musk’s previous pledges of increasing the fee.
“Tesla is going through a ‘code red situation’ right now,” said Stephen Ethan, an analyst at MarketsXplora. “The company is facing waning demand for electric vehicles, stiffening competition from Chinese automakers, and production challenges that have impacted deliveries.”
The impending layoffs are the latest sign of the challenges facing Tesla as it navigates a rapidly evolving EV market. The company’s dominance in the space has been eroded by the rise of Chinese automakers, such as BYD and Nio, which have gained significant market share in both domestic and international markets.