Tesla to lay off 10% of workforce as it aims to become 'lean and innovative'

CEO Elon Musk says there has been duplication of roles and job functions in certain areas

Tesla's chief executive Elon Musk said layoffs will help the company to become hungry for the next growth phase cycle. Reuters

Tesla plans to reduce its global workforce by more than 10 per cent as the company faces declining sales and increased competition in the electric vehicle market.

The Texas-based company had 140,473 employees as of December last year.

Chief executive Elon Musk said the move would help the company to become “lean, innovative and hungry for the next growth phase cycle”.

“We have done a thorough review of the organisation and made the difficult decision to reduce our headcount by more than 10 per cent globally,” Mr Musk said in a memo sent to employees.

The memo did not specify the exact number of jobs that will be affected.

“With this rapid growth there has been duplication of roles and job functions in certain areas. 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,” Mr Musk said.

Tesla this month reported a nearly 8.5 per cent annual drop in its March quarter deliveries.

The drop in deliveries, which was the first in four years, was caused by various factors, primarily Houthi rebel strikes in the Red Sea, an arson attack at Tesla's German factory and increased production of the updated Model 3.

The world's largest car maker by market value produced 433,371 cars last quarter but delivered only 386,810. It marked the first time Tesla reported a year-on-year decline since the Covid-19 pandemic affected deliveries in 2020.

In his memo, billionaire businessman Mr Musk also warned his employees they should be ready for the “difficult job that remains ahead”.

“We are developing some of the most revolutionary technologies in auto, energy and artificial intelligence … your resolve will make a huge difference in getting us there,” he said.

Tesla: one of the worst performers in S&P index

Tesla's stock is one of the worst performers in the S&P 500 index, which has jumped nearly 9 per cent since start of the year.

Tesla was trading 0.40 per cent down in pre-market trading at $170.40 on Monday. Shares of the company closed at $171.05 on Friday, giving it a market value of $535.98 billion. The company's shares have dropped nearly 31 per cent since the start of the year.

Industry experts are not bullish about the company’s growth prospects, prompting them to adjust its future stock price range downwards.

Last week, Philippe Houchois, an analyst at capital markets firm Jefferies, reduced his price target for Tesla stock from $185 to $165, while Piper Sandler analyst Alexander Potter adjusted the firm's target down to $205 from $225.

Tesla, which went public in 2010, is expecting a slowdown this year, after years of bumper sales growth. The company is expected to report its last quarter’s earnings on April 23.

Mr Houchois and Mr Sandler predicted Tesla would deliver 1.77 million and 1.79 million vehicles this year, respectively, down from 2023’s record of more than 1.81 million.

Booming EV market

The car industry's transition to EVs is accelerating. By 2030, more than one in four new passenger cars sold will be an EV, according to S&P Global Mobility report.

The top car makers are expected to account for more than 70 per cent of global EV production by 2030 (compared with 2022 when they represented only 10 per cent of all EV manufacturers), it said.

In December, the billionaire co-founder of Xiaomi unveiled the company’s first EV, announcing ambitions to become a top global car maker in 15 to 20 years. In November, Tesla delivered its first Cybertrucks, four years after the futuristic vehicles first appeared.