Tesla Inc. (TSLA.O) is set to reduce its workforce by over 10% according to an internal memo obtained by Reuters on Monday. This decision comes as the company faces a downturn in sales and an increasingly competitive electric vehicle market.
The company, which is the most valuable automaker in terms of market capitalization, had a global staff count of 140,473 as per its annual report in December 2023. The specific number of jobs impacted by this reduction was not disclosed in the memo.
Tesla’s CEO, Elon Musk, expressed in the memo that preparing for the next growth phase requires stringent cost-cutting and productivity enhancements across the company. The layoffs are a part of a strategic plan that follows an exhaustive organizational review.
There has been no immediate response from Tesla regarding the reported layoffs. Ahead of market opening on Monday, Tesla’s shares saw a slight decrease of 0.3%.
This move follows Tesla’s report earlier in the month indicating a drop in global vehicle deliveries in the first quarter, marking the first decrease in nearly four years. Despite reducing prices, the company has not seen the anticipated demand stimulation.
With quarterly results due on April 23, Tesla is anticipating a slower 2024 after years of swift growth in sales. Challenges for the automaker include outdated models amidst high-interest rates that dampen consumer spending and the emergence of more affordable vehicles from competitors, especially in China, the largest automotive market.
Moreover, Tesla has recently shelved plans for a budget-friendly vehicle that was anticipated to significantly contribute to mass-market penetration.
The company aims to reinforce its profit margins, which have suffered from continuous price slashes. The fourth quarter witnessed Tesla’s gross profit margin drop to 17.6%, the lowest in over four years.
Previously, in February of the last year, Tesla had already executed a 4% staff reduction in New York as a result of a performance review process and prior to a unionization effort among employees.
The news of the impending job cuts was first reported by Electrek, a tech news outlet.