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Electric car builder Tesla is laying off 14,000 employees, which is 10 percent of its workforce. The car manufacturer wants to save costs in this way. Two top executives also left the company.
Things are no longer going so well at Tesla, maker of electric cars. Until recently, Tesla’s biggest problem was getting its factories running fast enough to meet the high demand, but that has now been reversed. Tesla is struggling with weak demand for its cars. In the first quarter it sold only 368,000 cars, a decrease of 8 percent compared to the same quarter a year earlier.
Because the company is fully committed to growth, it now has to cut its workforce. According to a leaked memo from CEO Elon Musk, the company will lay off about 10 percent of its workforce, equivalent to 14,000 employees. Musk justifies this choice because Tesla is now between two growth phases and must therefore pay extreme attention to costs and productivity. He says management went through the company with a comb to eliminate duplicate or redundant positions. “There is nothing I hate more than this, but it has to be done,” Musk said in the memo about the layoffs.
Tesla has grown strongly in recent years. The workforce doubled in three years. The company also opened two large assembly plants in Grünheide, near Berlin, and in Austin, Texas, in the past three years. Tesla did freeze plans for a new factory in Mexico, where it had already purchased a construction site.
Stock in free fall
Tesla shares have been in free fall for several months. It has already lost a third of its value. The demand for new Teslas is disappointing. There is a lot of competition from China, global demand for electric cars is stalling and Tesla is slow to release new models. Since last year, it has been building its futuristic Cybertruck from stainless steel. But production is finding it difficult to get going, which means that too few of those cars are rolling off the bank.
A new growth spurt should come from the Model 2 – a $25,000 car – in two years, but according to the Reuters news agency, that car has been scrapped or built later than expected. Doubts are increasing as to whether Tesla is still a growth company if it barely launches new models.
Musk tried to boost the stock last week by announcing that it was launching the Robotaxi early, a car that should drive around fully automatically. That car would be presented in August. The question is whether Tesla will succeed in what other car and tech companies have not yet succeeded in: making a car drive fully autonomously in all circumstances.
Investors reacted with disappointment to the news. The stock fell 3 percent. They usually embrace major savings plans because they increase profits. On the other hand, the round of layoffs confirms that Tesla expects little growth in the next two years. In addition, it was also leaked that two management strongholds are resigning: Drew Baglino and Rohan Platel are leaving Tesla. The latter was responsible for contacts with the government, the former for the drivetrain at Tesla. Tesla is known as a company where top managers usually do not work long hours: the workload is extremely high and Elon Musk is said to be particularly demanding.
