Technology

Tesla will lay off more than 10% of global workforce: Read the Elon Musk memo

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Elon Musk, CEO of Tesla, speaks with CNBC on May 16th, 2023.
David A. Grogan | CNBC

Tesla shares were down over 1% in premarket trade Monday on media reports that the automaker will lay off more than 10% of its global workforce.

The company’s stock was down 1.32% in premarket deals at roughly 8:20 a.m. ET.

“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,” Tesla CEO Elon Musk said in an internal memo cited by Reuters, which tech publication Electrek referenced in the first report of the layoffs.

“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% globally,” the memo said.

CNBC was unable to independently verify the memo and has reached out for comment.

Tesla had 140,473 employees as of December 2023.

Tesla shares have taken a bruising in recent months, down 31% in the year-to-date amid waning demand for electric vehicles and stiffening competition from Chinese automakers, which benefit from Beijing subsidies. One of these rivals, BYD, last year wrested Tesla’s mantle to become the world’s largest seller of EVs — and Musk has previously recognized that China, which is home to a large Tesla plant, may also house the company’s strongest competition.

“There’s a lot of people who are out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong,” Musk said in November.

Margins

Foreshadowing layoffs, the U.S. company earlier this month reported its first annual decline in vehicle deliveries since 2020, when the Covid-19 pandemic disrupted production extraneous of demand — first-quarter deliveries fell by 8.5% on the year to 386,810 in the first quarter, with output down 1.7% from a year earlier and 12.5% sequentially.

Deliveries serve as an approximation of Tesla sales but are not precisely defined in the company’s shareholder communications.

Since then, the firm has also resorted to trimming the subscription price of its premium driver assistance system, the Full Self-Driving package, for U.S. customers — in a move sharply at odds with Musk’s previous pledges that the FSD fee would only bulk up as Tesla bolsters the system’s features and functionality.

But the squeeze on the company’s operating margin — which came in at 8.2% in the fourth quarter, down from the 16% for last year — remains, and Tesla has warned investors to brace that vehicle volume growth this year “may be notably lower” than the rate logged in 2023, noting it is “currently between two major growth waves.”

Logistical challenges exacerbated Tesla’s problems this year. The company’s component supply was a casualty of disruptions caused by Yemeni Houthi maritime attacks in the Red Sea, while the automaker’s gigafactory near Berlin, Germany, was forced to briefly suspend production due to a suspected arson at a nearby electricity substation.

Tesla will post its first-quarter financial results on Tuesday, April 23.

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