US EV giant Tesla is to axe more than 10% of its global workforce, amid falling sales and an increasingly brutal price war, according to an internal memo.
The world’s largest automaker by market value had 140,473 employees globally as of December 2023, its latest annual report shows. The memo did not say how many jobs would be affected.
Some staff in California and Texas have already been notified of the layoffs, a source told Reuters.
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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,” Tesla CEO Elon Musk said in the memo.
“As part of this effort, we have done a thorough review of the organisation and made the difficult decision to reduce our headcount by more than 10% globally,” it said.
Tesla did not immediately respond to a request for comment. Its shares were down 1.3% in pre-market trading.
The stock has fallen about 31% so far this year, underperforming legacy automakers such as Toyota Motor and General Motors, whose shares have rallied 45% and 20% respectively thanks to a slow consumer transition away from traditional internal combustion engine vehicles.
Energy giant BP has also cut over a tenth of the workforce in its EV charging business after a bet on rapid growth in commercial EV fleets didn’t pay off, it was reported on Monday, underscoring the broader impact of slowing EV demand.
“Tesla is maturing as a company and isn’t the growth story that it used to be,” said Craig Irwin, senior research analyst at Roth Capital. “Layoffs imply management expects weak demand to persist.”
Still, Pedro Pacheco, vice-president of research and automotive at Gartner, said the cuts could simply be a sign of the company trimming costs ahead of releasing new models, as sales slow down from the strong growth propelled by the launch of the Model Y and Model 3.
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Tesla reported this month that its global vehicle deliveries in the first quarter fell for the first time in nearly four years, as price cuts failed to stir demand.
The EV maker has been slow to refresh its ageing models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world’s largest auto market, are rolling out cheaper models.
Reuters reported this month that Tesla had cancelled a long-promised inexpensive car that investors have been counting on to drive mass market growth. Musk denied the report, but did not identify any specific inaccuracies.
The company is looking to shore up its margins, which have been dented by repeated price cuts, especially in China where it faces stiff competition from local rivals including market leader BYD, which briefly overtook the US company as the world’s largest EV maker in the fourth quarter, and new entrant Xiaomi.
Tesla recorded a gross profit margin of 17.6% in the fourth quarter, the lowest in more than four years.
Tesla had previously of its workforce in New York in February last year as part of a performance review cycle and before a union campaign was to be launched by its employees.
- Reuters with additional editing by Sean O’Meara
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