Tesla will lay off more than 10% of its global workforce, according to a memo sent to employees by CEO Elon Musk.
The company’s shares fell 3% on Monday morning.
“As we prepare the company for our next phase of growth, it is critically important that we look at every aspect of the company for cost reductions and productivity gains,” Musk said in the memo obtained by CNBC.
“As part of this effort, we undertook a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% worldwide,” the memo said.
The note was first reported by Electrek.
Tesla had 140,473 employees in December 2023.
Tesla shares have been bruised in recent months, down 31% year-to-date. While electric vehicle sales continue to gain popularity worldwide, their sales growth rate has slowed especially for Tesla. The company now faces more competition than ever before.
By the end of 2023, China’s BYD has temporarily dethroned Tesla as the world’s leading electric vehicle manufacturer. Chinese smartphone company Xiaomi in March said it would sell its first electric car for much less than Tesla’s Model 3.
Musk has previously acknowledged that China, home to a large Tesla factory, may also house the company’s strongest competition. “There are a lot of people out there who think the top 10 car companies will be Tesla, followed by nine Chinese car companies. I think they might not be wrong,” Musk said in November.
Some would-be Tesla customers are now skipping the brand due to Musk’s inflammatory rhetoric
Earlier this month, Tesla reported the first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted off-demand production – first-quarter deliveries fell 8.5% year-on-year to 386,810 in the first quarter, with output down 1.7% from a year earlier and 12.5% sequentially despite discounts and incentives offered to customers throughout the quarter.
More recently, Tesla lowered the subscription price of its premium driver assistance system, marketed as the Full Self-Driving, or FSD, option for customers in the US. The move was in stark contrast to Musk’s previous pledges that the FSD fee would only increase when Tesla added features and functionality to the system. Despite the branding, the system does not make Tesla vehicles self-driving and requires a driver to be alert on the road, ready to steer or brake at any moment.
But the squeeze on the company’s operating margin — which hit 8.2 percent in the fourth quarter, from 16 percent a year earlier — remains, and Tesla has warned investors to back that vehicle volume growth this year “may is significantly lower’ than the rate recorded in 2023, saying it is ‘currently between two major growth waves’.
Logistical challenges have compounded Tesla’s woes this year. The company’s parts supply was a victim of disruptions caused by Yemen’s Houthi naval attacks in the Red Sea, while the carmaker’s giant plant near Berlin was forced to briefly suspend production due to a suspected arson attack at a nearby power substation.
Tesla is scheduled to report first-quarter financial results on April 23.
Here’s the full note from Musk (transcribed by CNBC):
Over the years, we have grown rapidly with many factories scaling up around the world. With this rapid growth, there has been duplication of roles and jobs in some areas. As we prepare the company for our next phase of growth, it is extremely important that we look at every aspect of the company for cost reductions and productivity gains.
As part of this effort, we undertook a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% worldwide. There is nothing I hate more, but it has to be done. This will allow us to be lean, innovative and hungry for the next growth phase cycle.
I would like to thank everyone who is leaving Tesla for their hard work over the years. I am deeply grateful for your many contributions to our mission and wish you well in your future opportunities. It’s very hard to say goodbye.
For those remaining, I would like to thank you in advance for the hard work that remains. We develop some of the most revolutionary technologies in automotive, energy and artificial intelligence. As we prepare the company for the next phase of growth, your determination will make a huge difference in getting us there.
Thanks,
Elon
Correction: Tesla’s fourth-quarter operating margin came in at 8.2% in the fourth quarter, up from 16% a year earlier. A previous version misstated a time element.