Tesla CEO Elon Musk speaks with CNBC on May 16, 2023.
David A. Grosjean | CNBC
Tesla It will lay off more than 10% of its global workforce, according to a memo sent by CEO Elon Musk to employees.
Shares were down about 1% on Monday morning.
“As we prepare the company for the next phase of growth, it is extremely important that we look at every aspect of the company to reduce costs and increase productivity,” Musk said in the memo obtained by CNBC.
“As part of this effort, we conducted a comprehensive review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the memo said.
Tesla had 140,473 employees as of December 2023.
The memo was first reported by technology publication Electrek.
Tesla shares have suffered a shock in recent months, falling by 31% since the beginning of the year so far amid declining demand for electric cars and intensifying competition from Chinese automakers, which benefit from Beijing’s support. One of those rivals, BYD, snatched Tesla's mantle last year to become the world's largest seller of electric vehicles — and Musk has previously recognized that China, which is home to a large Tesla factory, may also host the company's strongest competition.
“There are a lot of people who think the top 10 car companies will be Tesla followed by nine Chinese car companies,” Musk said in November. “I think they may not be wrong.”
The US company earlier this month announced its first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted out-of-order production – deliveries in the first quarter fell by 8.5% year-on-year to 386,810 in The first quarter, with production falling 1.7% from the previous year and 12.5%, respectively.
Since then, the company has also reduced the price of a subscription to its premium driver assistance system, the Full Self-Driving Package, for customers in the US — a move that contrasts sharply with Musk's previous pledges that FSD fees would only increase over time. Tesla is working to enhance the system's features and functionality.
But pressure on the company's operating margin — which was 8.2% in the fourth quarter, down from 16% a year ago — remains, and Tesla has warned investors that vehicle volume growth this year “may be significantly lower.” than the rate recorded in 2023, indicating that it is “currently between two major waves of growth.”
Logistical challenges have exacerbated Tesla's problems this year. The company's component supply has been a victim of disruptions caused by Yemeni Houthi naval attacks in the Red Sea, while the carmaker's massive plant near Berlin, Germany, was forced to briefly suspend production due to suspected arson at a nearby power substation.
Tesla will announce its first-quarter financial results on Tuesday, April 23.
Here's the full memo from Musk:
Over the years, we have achieved rapid growth with the expansion of many factories around the world. With this rapid growth, there was a duplication of job roles and tasks in certain areas. As we prepare the company for the next stage of growth, it is extremely important to consider every aspect of the company to reduce costs and increase productivity.
As part of this effort, we undertook a comprehensive review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it has to be done. This will enable 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 so hard to say goodbye.
As for those remaining, I would like to thank you in advance for the difficult task that still lies ahead. We are developing some of the most revolutionary technologies in automotive, energy and artificial intelligence. As we prepare the company for the next stage of growth, your determination will make a huge difference in getting us there.
Thanks,
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