Tesla’s Layoffs Point to Challenges Ahead


Tesla (NASDAQ:TSLA) has disclosed a significant downsizing of its workforce following a disappointing Q1 delivery report, aligning with moves made by both traditional automakers and electric vehicle manufacturers, as outlined in an internal communication.

CEO Elon Musk confirmed the reduction in an email to employees, stating a reduction of “more than 10%” in headcount, following earlier reports suggesting layoffs could reach up to 20%.

“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 wrote. “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. There is nothing I hate more, but it must be done.”

With Tesla’s workforce numbering around 140,000 globally, the impact is expected to affect at least 14,000 employees. Tesla’s stock dipped in early trading following reports of the layoff memo from Musk.

These layoffs follow a disappointing Q1 delivery report for Tesla, which fell short of consensus estimates and resulted in an excess supply of over 46,000 vehicles. This suggests that Tesla is experiencing the effects of slowing EV demand, both domestically and internationally, marking its first year-over-year quarterly decline in deliveries since 2020.

Renowned Tesla advocate Dan Ives at Wedbush Securities cautioned that the layoffs signal challenges ahead for Tesla, reflecting in Monday’s stock movement. Ives maintains a $300 price target and Buy rating on the stock.

“This is an ominous signal that speaks to tough times ahead for Tesla as Musk navigated this Category 5 storm,” Ives commented. “Demand has been soft globally, and this is an unfortunately necessary move for Tesla to cut costs with a softer growth outlook.”

While Musk has previously highlighted high rates and prices hindering EV adoption, emphasizing lower prices as essential for growth, reports surfaced last week suggesting Tesla had scrapped plans for a long-rumored next-gen vehicle starting at $25,000. Musk refuted the report, announcing a Tesla robotaxi debut on Aug. 8.

Tesla is slated to report earnings on Tuesday, April 23, likely providing further insight into the layoffs’ implications on its finances and near-term demand.

Not all analysts view today’s layoff announcement negatively. CFRA analyst Garrett Nelson sees it as a reflection of industry trends, stating, “Layoffs would be consistent with actions undertaken by other automakers – and particularly EV pure plays such as Rivian and Lucid — amid slowing EV growth rates. We view the announcement as a sign of the times, but the fact Tesla is taking action to reduce costs amid the slowdown should be positive for the bottom line.”

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