Tesla Cuts More Than 10% Of Its Workforce

Tesla is slashing more than 10% of its global workforce, as it grapples with falling sales and an intensifying price war for electric vehicles (EVs), plus reputational damage from crashes.

“About every five years, we need to reorganise and streamline the company for the next phase of growth,” CEO Elon Musk commented in a post on X.

Two senior leaders, Battery Development Chief Drew Baglino and Vice President for public policy Rohan Patel, also announced their departures, drawing posts of thanks from Musk although some investors were concerned. Baglino had served as senior vice president of Tesla’s powertrain and energy engineering team since 2019. 

Drew Baglino’s Post On X Announcing His Departure

Rohan Patel personally thanked Mr Musk for giving him the chance and “empowering” him to lead big initiatives at the firm. He also said that the “never-say-die attitude and scrappiness” of the wider Tesla team is what he thought made it a special place to work.

“We have done a thorough review of the organisation and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle,” said the email from Mr Musk.

A Tesla employee who had been told he was being let go disclosed he had subsequently been locked out of his emails, as had all other staff being laid off. One of the executive team, Andrew “Drew” Baglino, said in a post on X (formerly Twitter) on Monday he had made the “difficult decision” to leave the firm after 18 years.

Their departures “signal that Tesla’s major growth phase is meeting serious headwinds,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, deeming it “the larger negative signal today” than the announcement of job cuts.

However, analysts from Gartner and Hargreaves Lansdown said the cuts were a sign of cost pressures as the carmaker invested in new models and artificial intelligence. The electric vehicle (EV) maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items. 

There is also the ongoing pressure from China as the rise of their inexpensive EVs have begun to flood the market with affordable models. The EV pioneer is also hit by reputational damage after settling a lawsuit involving a tragic crash in 2018 with his Model X on Autopilot – fueling doubts over autonomous driving.

Evangelos Simoudis, investor, author and corporate adviser, said:

“Companies are realising that attaining level 4 of autonomous driving is way more difficult and expensive than the industry predicted.”

Level 4 autonomous driving refers to the vehicle moving automatically in longitudinal and lateral axes and the driver does not have to keep their eyes on the road or supervise the vehicle. Last October, GM found itself in hot water after an accident involving a pedestrian with its robotaxi. It resulted in General Motors’ Cruise recalling 950 driverless cars from the roads across the United States and slapped with federal investigations, Tesla’s brake systems fault also resulted in a massive recall.

The company is set to report its quarterly earnings later this month but has already reported a decline in vehicle deliveries in the first quarter, its first in nearly four years and also below market expectations. Some analysts described the results as “tumultuous.”

In March, Tesla reduced production at the Gigafactory in Shanghai and last week Tesla told employees who work on the Cybertruck that shifts will be shorter on the production line at the Austin. Tesla has begun to feel the impact of slowing demand for electric vehicles (EVs).

Elon Musk has recently denied reports that the company has scrapped plans to produce an inexpensive car, which has been one of his longstanding goals to make affordable EVs for the masses. Tesla shares were down 0.8% in premarket trading on 15 April 2024.

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