Signs of unrest at Tesla deepened on Monday after the electric car maker told employees it was laying off more than 10 percent of its workforce to cut costs and two senior executives resigned.
The job cuts, which amount to around 14,000 people, come as the company faces increasing competition and falling sales. The changes and layoffs in management are a reminder of Tesla boss Elon Musk’s unpredictability at a critical time for the company.
Mr. Musk has not outlined a plan to reverse the decline in car sales, and he appears to be focused on long-term ventures like a self-driving taxi rather than new models that would help Tesla compete with cars introduced by established automakers new competitors from China.
“As we prepare the company for the next phase of growth, it is critically important to examine every aspect of the business for cost reductions and productivity improvements,” Mr. Musk told employees in an email Monday morning, a copy of which was reviewed by the New York Times.
“There is nothing I hate more, but it must be done,” he wrote.
Hours after that email, Drew Baglino, a senior vice president who played a big role in the company’s rise from start-up to dominant electric car maker, said he had resigned.
“I made the difficult decision to leave Tesla yesterday after 18 years,” Mr. Baglino said in a post on X, the social media site. Mr. Baglino is one of only three managers, along with Mr. Musk, listed as top executives on the company’s website. His longevity was unusual for a company known for high management turnover.
Mr. Baglino may have been blamed for some of Tesla’s recent problems, said Gary Black, managing partner at investment firm Future Fund. “Someone has to take the hit because of the sharp slowdown in shipment growth, near-record inventories and falling margins, and it wouldn’t be Elon,” Mr. Black said on X.
Tesla also appeared to lose a key to regulatory approval for self-driving technology. Rohan Patel, a former adviser to President Barack Obama and head of policy and business development at Tesla, quietly confirmed reports that he was leaving the company. In a post on X, Mr. Patel thanked his colleagues and Mr. Musk for “the last eight years at Tesla.”
“My plans are to supervise my daughter’s second-grade recess, practice violin, go to a number of sporting events that are on my bucket list, and take my very patient wife on a long-planned trip,” Mr. Patel said .
Investors often welcome job cuts because they can lead to higher profits. However, that wasn’t the case on Monday as Tesla shares ended the day down more than 5 percent.
Tesla regularly segregates its workforce to remove employees whose performance managers deem them weak, but the number is typically lower. “This is something that Elon and Tesla have done repeatedly throughout their careers,” said Scott Acheychek, chief executive of REX Shares, a company that offers investors funds to bet on or against Tesla shares. “Ten percent is quite a lot,” Mr. Acheychek added.
Mr. Musk’s email to employees was previously reported by Electrek, an online news site, and Handelsblatt, a German business newspaper.
Mr. Musk gave no details about where the cuts would be made. Many of Tesla’s workers work at four major auto factories in Fremont, California, Austin, Texas, Shanghai and near Berlin. Tesla also has a factory in Buffalo that makes chargers and a factory near Reno, Nevada that makes batteries.
The layoffs could help efforts by the United Automobile Workers union to organize Tesla employees in the United States. The company’s workers may be more open to the union if they believe representation would provide them with greater job security. Workers at a Volkswagen factory in Tennessee will vote on whether to join the UAW this week, and Mercedes-Benz workers in Alabama will vote on it next month.
Mr. Musk’s many other ventures and his penchant for polarizing political statements have raised questions about his focus on running Tesla. Wall Street is becoming increasingly concerned about the company: Tesla’s share price has lost about a third of its value this year.
Many investors had expressed hope that Tesla would boost flagging sales by introducing a car that would sell for about $25,000 as early as next year, thereby increasing the number of people who would buy the cars the company could afford, and to respond to competition from Chinese companies that already sell electric vehicles for just half that price.
Mr. Musk questioned those plans when he announced this month that Tesla would unveil a robotaxi in August. The self-driving taxi is considered a dream of the future, also because even the most advanced systems available today sometimes make glaring errors. Additionally, federal and state regulators must agree before Tesla can put such taxis on the road.
This month, Tesla reported a sales decline that surprised investors. The company said it delivered 387,000 cars worldwide in the first quarter, down 8.5 percent year-on-year. It was the first time Tesla’s quarterly revenue fell year-over-year since the pandemic began in 2020.
The company has cut prices significantly throughout 2023 to increase demand, which has reduced the profit Tesla makes on each car. Last week, Tesla cut the price of its most advanced driver assistance software from $199 to $99 per month. But price cuts seem to be losing their effect. Tesla will report its first quarter financial results on April 23rd.
Rivals such as China’s BYD, Germany’s BMW, and South Korea’s Kia and Hyundai Motor reported rising electric vehicle sales during the same period, suggesting that lower overall demand for battery-powered models was not the only explanation for Tesla’s problems.
Established companies are closing the gap with Tesla in battery technology and building new assembly lines to achieve the cost savings possible with mass production. Honda plans to begin producing electric vehicles next year at a factory in Marysville, Ohio.
Hyundai will begin producing electric cars in October at a new factory in Georgia, José Muñoz, president and global chief operating officer of Hyundai Motor, said in an interview last month. Hyundai will also allow customers to buy cars on Amazon, a response to Tesla’s practice of selling cars online.
Mr. Muñoz said customers have been willing to pay more for Hyundai electric cars than for comparable Teslas. “In the beginning, Tesla was premium,” he said. “Now we are premium.”
Jason Karaian and Melissa Eddy contributed reporting.
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2024-04-15 23:30:09
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