With Earth Day just around the corner, it’s an electric week at Auto123 as we turn the lights towards noteworthy developments in the EV segment.
Tesla yesterday laid off more than 10 percent of its global workforce, or around 14,000 employees. The electric vehicle manufacturer is reacting to slowing global demand and downward pressure on prices.
Company CEO Elon Musk announced the news in a press release, saying it was a difficult decision. The Elektrek website was the first to publish the information.
Tesla currently employs 140,473 people worldwide.
To explain why the company had come to this point, Elon Musk mentioned that Tesla had grown rapidly in recent years and, as a result, there had been a duplication of roles and functions in certain areas.
“There is nothing I hate more (than job cuts), but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.”
- Elon Musk
To many analysts, Tesla's decision is not surprising. In the first quarter of 2024, the company delivered 387,000 vehicles, some 13 percent below market forecasts. It’s the first time in four years that Tesla has experienced such a situation.
The company cited production problems due to unforeseen factors, such as attacks on ships in the Red Sea and arson at its Berlin factory, but the figures also highlighted a slowdown in global demand, reports The Guardian.
Following the release of sales figures this month, Elon Musk dismissed comments that his controversial personality had caused a drop in sales and pointed out that the figures for Chinese rival BYD were just as bad, saying it was a “tough quarter for everyone.”
The company has also seen its margins shrink due to repeated price cuts, particularly in China where it faces stiff competition from local manufacturers, including BYD, which briefly overtook Tesla as the world's largest electric vehicle manufacturer in the fourth quarter of 2023.
Tesla shares fell 5.6 percent yesterday (Monday), from $171.05 on Friday evening to $161.48. The drop reduced the company's market capitalization by around $38 billion USD; it now stands at $506 billion, compared with $544 billion at the end of last week. Since the start of the year, Tesla has lost a third of its value, as per The Guardian.
We'll have to see, with the results of the other three quarters of this year, whether the decision taken will have the desired effects.