Tesla, the world's largest automaker by stock market value, is set to cut around 15,000 jobs globally in a bid to reduce costs and bolster productivity, according to reports from tech publication Electrek and Reuters. The electric vehicle maker, led by Elon Musk, has been grappling with soft demand for its vehicles, increased competition, and the impact of higher interest rates across much of the western world.
While Tesla has not officially commented on the reported layoffs, the internal memo seen by Electrek and Reuters reveals that the company is taking drastic measures to streamline its operations. The cuts, which represent more than 10% of Tesla's global workforce of over 140,000 employees as of December 2023, are part of a larger effort to look at every aspect of the company for cost reductions and increasing productivity.
In the memo, Musk is reported to have said, "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. As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally."
The news of the layoffs comes as Tesla faces a challenging market environment, with the cost of living crisis and higher interest rates squeezing consumer budgets. Despite cutting prices several times to attract buyers, the company has struggled to maintain its growth momentum, reporting a decline in vehicle deliveries in the first quarter of its financial year - the first such decline in nearly four years.
As part of the cost-cutting measures, Tesla has also reportedly paused some stock rewards and canceled some employees' annual reviews. Additionally, the company has reduced production at its Gigafactory Shanghai, signaling a potential slowdown in the world's largest auto market.
The layoffs and cost-cutting measures mark a significant shift for Tesla, which has been known for its rapid sales growth and ambitious expansion plans. The company's decision to scrap plans for an inexpensive car, abandoning one of Musk's longstanding goals to make affordable EVs for the masses, further highlights the challenges it faces in the current market environment.
Analysts and investors will be closely watching Tesla's quarterly earnings report, scheduled for April 23, to gauge the impact of the layoffs and cost-cutting measures on the company's financial performance. The announcement of the job cuts has already had an impact on Tesla's stock, with shares down 0.6% in premarket trading on Monday.
As Tesla navigates the challenges of a slowing market and increased competition, particularly from cheaper models in China, the company will need to strike a delicate balance between reducing costs and maintaining its competitive edge. The success of these measures will be crucial in determining Tesla's ability to weather the current storm and position itself for future growth.
