Tesla to Lay Off 10% of Its Global Workforce Amidst Low Sales and Rising Competition

• Through an internal memo, Elon Musk announced that the company has decided to lay off 10% of its total workforce-which is approximately 14,000 jobs.
• Reasons for the job cuts include declining Tesla sales and increasing competition from Chinese EV manufacturers.
• Just a few days ago, the company also reported its first year-over-year decline in car deliveries since 2020.

Tesla has decided to let go of more than 10% of its global workforce (roughly 14,000 jobs) just a few weeks after the company reported its first year-over-year decline in car deliveries since 2020.

Between January and March or 2024, Tesla delivered 386,810 electric vehicles, whereas in the same quarter last year, it delivered 423,000 vehicles. That's around a 9% dip in sales.

The news was first circulated through an internal memo where Elon Musk wrote There is nothing I hate more, but it must be done." Soon thereafter, he put out a tweet saying that the company needs to be reorganized and streamlined every five years to enter the next phase of growth.

Reasons for the Tesla Layoffs

While a dip in sales and the need for restructuring are seemingly the biggest reasons behind the job cuts, there's apparently two more reasons.

In the memo, Musk said that over the last few years, the company has grown tremendously which led to the duplication of certain roles. So, in order to successfully move forward and cut down unnecessary expenses, such duplicated roles need to be removed.

At the end of the memo, Elon Musk thanked all the departing employees for their contribution to the company and extended his gratitude to those who will continue to be a part of Tesla moving forward.

Along with falling demand for EVs in general, Tesla is also facing stiff competition from Chinese automakers who are producing EVs at a much cheaper rate.

The competition is so fierce that last year Tesla lost the title of the world's top maker of electric vehicles to the Chinese automaker BYD. Even cutting prices on models by up to $20,000 didn't help Tesla.

More bad news for Tesla:

• Production at Tesla's Gigafactory in Shanghai has already been reduced.
• Furthermore, employees who work on the Tesla Cybertruck were told last week that their shifts will shorten on the production line at Austin.

It's also interesting to note that Tesla is not the first major tech company to announce layoffs. In March this year, big names such as Apple, Dell, and IBM all announced layoffs. Check out my in-depth guide on March tech layoffs for more details.

Which Tesla Teams Will Be Affected by This Layoff?Sources close to the matter have anonymously relayed information that Tesla's China staffwill see the most impact of the layoffs. Note that China is Tesla's second-largest market after the US.

Additionally, certain key Tesla employees have announced their departure on social media.

Tesla's senior vice president of powertrain and energy engineering Drew Baglino is leaving the company after 18 years of service.

Talking about his experience, he shared a post on X saying how he loved tackling all the challenges that came along with his team and is honored to have been a part of a project focused on the transition to sustainable energy.

He also added that he hadn't yet planned his next project and would like to spend some time with his family and kids first. Then he went on to say that knowing himself, he probably wouldn't stay still for long. Musk responded to Drew's post and said Few have contributed as much as you have."

Rohan Patel, senior global director of public policy and business development, also took to his X account to announce that he is leaving the company after eight years.

Layoffs' Impact on Tesla's Share Prices

1. On the back of the layoff news, Tesla's shares fell by more than 5% during Monday's trading session.
2. It's also worth noting that this year alone the company's shares have lost around one-third of their value.

What's Next for Tesla?

Considering the declining sales and increasing competition, it's fair to say that Tesla's fate hangs in the balance.

Just recently, there were also rumors that Tesla had decided to scrape off its plans to create an inexpensive car for the masses. However, we saw how Musk denied those rumors (by announcing the Tesla Robotaxi) and accused the source of lying.

Elon Musk is all set to unveil the first look of the robotaxi on August 8. Can it put Tesla back on an upward trajectory? Will it be able to push past the tough competition from Waymo, Cruise, and Zoox? All these are burning questions yet to be answered as of now.

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