Tesla laying off more than 10% of staff globally as sales fall

Tesla is laying off more than 10 percent of its global workforce, an internal memo seen by Reuters on Monday shows, as it grapples with falling sales and an intensifying price war for electric vehicles.

"About every five years, we need to reorganize 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.

Musk last announced a round of job cuts in 2022, after telling executives he had a "super bad feeling" about the economy. Still, Tesla headcount has risen from around 100,000 in late 2021 to over 140,000 in late 2023, according to filings with US regulators.

Baglino was a Tesla veteran and one of four members, along with Musk, of the leadership team listed on the company's investor relations website.

Scott Acheychek, CEO of Rex Shares — which manages ETFs with high exposure to Tesla stock — described the headcount reductions as strategic, but Michael Ashley Schulman, chief investment officer at Running Point Capital Advisers, deemed the departures of the senior executives as "the larger negative signal today" that Tesla's growth was in trouble.

Less than a year ago, Tesla's Chief Financial Officer Zach Kirkhorn left the company, fueling concerns about succession planning.

Tesla shares closed 5.6 percent lower at US$161.48 on Monday.

"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," Musk said in the memo sent to all staff.

"As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10 percent globally," it said.

Reuters saw an e-mail sent to at least three US employees notifying them their dismissal was effective immediately.

Tesla did not immediately respond to a request for comment.

Mass market

The layoffs follow an exclusive Reuters report on April 5 that Tesla had canceled a long-promised inexpensive car, expected to cost US$25,000, that investors have been counting on to drive mass-market growth. Musk had said the car, known as the Model 2, would start production in late 2025.

Shortly after the story published, Musk posted "Reuters is lying" on his social media site X, without detailing any inaccuracies. He has not commented on the car since, leaving investors and analysts to speculate on its future.

Tech publication Electrek, which first reported the latest job cuts, said on Monday that the inexpensive car project had been defunded and that many people working on it had been laid off.

Reuters also reported on April 5 that Tesla would shift its focus to self-driving robotaxis built on the same small-car platform. Musk posted on X that evening: "Tesla Robotaxi unveil on 8/8," with no further details.

Tesla could be years away from releasing a fully autonomous vehicle with regulatory approval, according to experts in self-driving cars and regulation.

Tesla shares have fallen about 33 percent so far this year, underperforming legacy automakers such as Toyota Motor and General Motors, whose shares have rallied 45 percent and about 20 percent, respectively.