Tesla to cut workforce by over 10 per cent - reports

Reports indicate Tesla is preparing to retrench 15,000 workers across the world in order to “lean, innovative and hungry for the next growth phase cycle”.

In a memo obtained by Electrek and Reuters, CEO Elon Musk told Tesla employees: “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 per cent globally.”

Automotive News understands Tesla will let go of 15,000 people. At the end of 2023 the company had 140,473 employees, according to its annual report.

Its unclear which parts of the company will see the greatest headcount reductions, but Electrek has noted Drew Baglino, the company’s head of powertrain and energy, and Rohan Patel, Tesla’s policy chairperson, have both their “Tesla-affiliated” badge on their Twitter — sorry, X — profiles.

Sources have told Reuters some staff in California and Texas have already been informed of their firing.

For many years Tesla’s sales have kept on growing, as have its profit margins, allowing its sharemarket valuation to far exceed those of legacy automakers. However in recent quarters as demand for EVs has cooled, the company has repeatedly cut prices to maintain sales momentum.

This tactic seemingly stopped working in the first quarter of 2024 when production exceeded deliveries by 46,651. With 386,810 vehicles sold globally, down 8.5 per cent from the same time last year, the quarter just past was the first time since July to September 2022 that Tesla’s sales have come in under 400,000.

The price cuts have also eaten into the company profit margins, with the company reporting a gross profit margin per car of 17.6 per cent at the end of last year. While this number is still high — mass market auto manufacturers typically have target margins of eight to 10 per cent — 17.6 per cent is the lowest reported by Tesla in four years.

Not only after it announced its disappointing sales figures, Reuters reported Tesla had cancelled development of a more affordable model.

The new car, often referred to as Model 2, was set to be priced from US$25,000 ($38,700). The car would the space left behind by the discontinued Chevrolet Bolt in the US, while also battling the rash of affordable EVs coming out from Chinese and European automakers.

Mr Musk refuted the report, tweeting that “Reuters is lying (again)”, while Franz von Holzhausen, Tesla’s chief designer, told a discussion panel to “stay tuned” and “don’t always believe what you read”.

With the Model S sedan and Model X crossover only produced in limited numbers, and available only in left-hand drive, Tesla is heavily reliant on the smaller Model 3 sedan and Model Y crossover.

Launched in 2017, the Model 3 recently received its first facelift, while the Model Y, which began production in 2020, is still awaiting its first major makeover.

Tesla’s outspoken CEO then took to his social media platform to announce the company will unveil a robotaxi on August 8, US time. It’s unknown how close the robotaxi is to production, trial service, or revenue service.

Regulators in California, Arizona and Nevada have told NBC News Tesla has yet to file the necessary permits, nor has the automaker contacted the relevant authorities about beginning the process.