Tesla to lay off more than 10% of staff; senior execs leave company

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

In a sign of further instability at the EV maker, Tesla's senior vice president Drew Baglino, in charge of battery development, and Rohan Patel, vice-president for public policy and business development, both announced their exits from the company on X.

Baglino was one of four members in Tesla's leadership team listed on the company's investor relations website that includes CEO Elon Musk. Musk in a response to Baglino's note on X thanked the executive for his work. "Few have contributed as much as you," Musk said.

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.

Tesla had 140,473 employees globally as of December 2023, its latest annual report shows. The memo did not say how many jobs would be affected.

In response to commentary on the news on X, Musk posted: "About every five years, we need to reorganize and streamline the company for the next phase of growth."

Monday's dismissals were effective immediately, according to a copy of the email sent to laid off employees seen by Reuters.

Tesla reported this month that its global vehicle deliveries in the first quarter fell for the first time in nearly four years, as price cuts failed to stir demand.

Aging models

The EV maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world's largest auto market, are rolling out cheaper models.

Reuters reported this month that Tesla has scrapped plans to produce an inexpensive car that investors have been counting on to drive mass market growth. Shortly after the story published, Musk posted "Reuters is lying" on his social media site X, without detailing any inaccuracies. He hasn't commented on the car since, leaving investors and analysts to speculate on its future.

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 is looking to shore up its margins, which have been dented by repeated price cuts, especially in China where it faces stiff competition from local rivals including market leader BYD, which briefly overtook Tesla as the world's largest EV maker in the fourth quarter, and new entrant Xiaomi.

Tesla recorded a gross profit margin of 17.6 percent in the fourth quarter, the lowest in more than four years.

Analysts said the layoffs were another sign that Tesla will struggle to maintain growth.

"Tesla is maturing as a company and isn’t the growth story that it used to be," said Craig Irwin, senior research analyst at Roth Capital. "Layoffs imply management expects weak demand to persist."

Analysts from Gartner and Hargreaves Lansdown said the cuts were a sign of cost pressures as the carmaker invests in new models and artificial intelligence.

Tesla had previously laid off 4 percent of its workforce in New York in February last year as part of a performance review cycle and before a union campaign was to be launched by its employees.