Tesla management has recently informed its employees about significant layoffs, attributed primarily to the company’s poor financial performance. This revelation was made just a week before Tesla’s first-quarter earnings report is due. Amidst a prolonged EV price war, Tesla has struggled to maintain its profit margins despite delivering a record 1.81 million vehicles in 2023. To counter dwindling profits, Tesla initiated price cuts to boost sales and stay competitive, unfortunately at the cost of its margin health.
The layoffs are sweeping, affecting more than 10% of Tesla’s workforce, which translates to around 14,000 employees globally, including operations in the United States, Europe, and China. The drastic reduction in staff spans across all departments and layers of seniority. An internal communication from CEO Elon Musk, accessed by TechCrunch, cited the necessity of these layoffs to slash costs, enhance productivity, and gear up for the company’s forthcoming phase of growth.
Surprisingly, the layoffs have not spared even high-performing employees, hinting at an indiscriminate approach to cutting costs. Sources familiar with the matter disclosed that many talented individuals engaged in projects now deprioritized by Tesla were among those let go. Some departments experienced cuts deeper than the company average, with claims of reductions up to 20%.
This workforce reduction aligns with Elon Musk’s aggressive pivot towards the development of fully self-driving vehicles. Despite previously unveiling plans for a more affordable EV, touted to start at approximately $25,000, Tesla has shifted its focus. The company recently scrapped this initiative in favor of a platform aimed to support a forthcoming robotaxi, as announced by Musk for a reveal on August 8. This strategic pivot reflects Musk’s visions, as recounted by his biographer, Walter Isaacson, focusing on a driverless taxi devoid of traditional manual controls.
Moreover, Tesla has seen the departure of two high-profile executives amidst these changes. Drew Baglino, Senior Vice President of Powertrain and Energy, and Rohan Patel, Vice President of Public Policy and Business Development, have exited the company. Patel cited nonspecific “big overall changes” at Tesla as his reason for departure, while Baglino, after an 18-year tenure, felt it was the right time to move on, leaving behind a strong leadership team and successful energy ventures. The timing of these exits follows the earlier departure of Tesla’s CFO, Zachary Kirkhorn.
These layoffs and strategic shifts come as Musk posted intentions on X to amass approximately 25% voting control of Tesla. His aim is to devote more attention to the electric vehicle maker, driving it to the forefront of AI and robotics innovation. This move underscores the broader challenges and transitions within Tesla, as it navigates financial strains, workforce reductions, and a realignment of its strategic priorities in pursuit of dominating the future of mobility and technology.
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