Tesla will cut employee salaries as much as 30% to reduce costs

The company will cut salaries for employees in and outside the US as it shuts down some operations

Pedestrians walk past a Tesla dealership in Shanghai, China, the biggest market for electric cars. The company is implementing pay cuts to reduce costs as it shuts some of its operations due to the CoShow more

Tesla will reduce employees’ salaries as much as 30 per cent starting this Monday to cut costs as it shuts down some operations because of the coronavirus pandemic.

In the US, the salary cut is 30 per cent for vice presidents and above, 20 per cent for directors and above, and 10 per cent for others, according to an internal memo seen by Bloomberg. Workers outside the US will see similar reductions. Employees who haven’t been assigned to critical tasks and who can’t work from home will be furloughed without pay, though they will keep health-care benefits.

Carmakers are trying to conserve cash with sales plunging toward zero amid plant shutdowns and stay-at-home orders. The virus outbreak hit just as Tesla was ramping up the production of its Model Y crossover, accelerating output at its new Shanghai plant and forging ahead with plans to build a new facility near Berlin.

“This is a shared sacrifice across the company that will allow us to progress during these challenging times,” Tesla said in the memo.

A Tesla representative declined to comment.

Tesla agreed to idle US production last month amid authorities’ orders, choking off the supply of cars to customers. The electric-vehicle maker expects to resume normal production at its US facilities on May 4, according to the memo.

Even after re-opening its facilities, Tesla will probably need about two weeks to ramp up production again, analysts at Credit Suisse Group said in a note. Tesla had about 30,000 cars in inventory at the end of the first quarter, which is sufficient to meet demand that has weakened, the analysts said.

The company has about 56,000 employees, according to a recent company email. Its sole US car production facility is in Fremont, California, where current stay-at-home orders extend until May 3.

At its Nevada gigafactory, Tesla is reducing on-site staff by 75 per cent, according to the county where the plant is located. The facility produces battery packs and electric motors with partner Panasonic.

Tesla’s Shanghai plant, meanwhile, recovered from a virus-related shutdown faster than many in the industry, helped by aid from local authorities. After resuming operations on February 10, the factory -- Tesla’s only outside the US -- has surpassed the capacity it had before the shutdown, reaching a weekly production of 3,000 cars, the company said last month.

Though down from a February peak, shares of Tesla are still up 30 per cent this year.