Tesla to lay off more than 10% of global workforce

Signs of trouble at Tesla grew Monday after the electric car maker told employees it would lay off more than 10% of its workforce to cut costs and two senior executives resigned.

The job cuts, amounting to around 14,000 people, come as the company faces increasing competition and falling sales. The leadership changes and layoffs are a reminder of the unpredictability of Tesla Chief Executive Elon Musk at a critical time for the company.

Mr. Musk has not outlined a plan to reverse declining car sales, and he appears to be focused on long-term projects such as self-driving taxis, rather than new models that would help Tesla compete with cars. introduced by established automakers and new Chinese rivals.

“As we prepare the company for the next phase of growth, it is extremely important to examine all aspects of the business to reduce costs and increase productivity,” Mr. Musk told employees in an email sent Monday morning, a copy of which was examined. by the New York Times.

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

Hours after that email, Drew Baglino, a senior vice president who played an important role in the company’s rise from a startup to a dominant electric car maker, said he had resigned.

“I made the difficult decision yesterday to leave Tesla after 18 years,” Mr. Baglino said in a post on X, the social media site. Mr. Baglino is one of only three managers, along with Mr. Musk, listed among the company’s top executives. the company’s website. His longevity was unusual in a company known for its high management turnover.

Mr. Baglino may have been blamed for some of Tesla’s recent problems, said Gary Black, managing partner of Future Fund, an investment firm. “Someone had to take the fall from the sharp deceleration in shipment growth, near-record inventories and falling margins and it wasn’t Elon,” Mr. Black said on X.

Tesla also appeared to lose a key element in gaining regulatory approval for self-driving technology. Rohan Patel, a former aide to President Barack Obama and head of Tesla’s political and business development, tacitly confirmed reports that he was leaving. In an article on X, Mr. Patel thanked his colleagues and Mr. Musk for “the last eight years at Tesla.”

“My plans are to be a recess supervisor for my second-grade daughter, practice my violin, attend many sporting events and take my very patient wife on a long-planned trip,” Ms. .Patel.

Investors often welcome job cuts because they can lead to higher profits. But that wasn’t the case on Monday, with Tesla shares ending the day down more than 5 percent.

Tesla regularly cuts its workforce to remove employees whose performance is considered low by managers, but the numbers are typically smaller. “This is something that Elon and Tesla have always done throughout their careers,” said Scott Acheychek, chief executive of REX Shares, which offers investors funds to bet on or against Tesla stock. “Ten percent is pretty big,” Mr. Acheychek added.

Mr. Musk’s email to employees was previously reported by Electrek, an online news site, and Handelsblatt, a German business newspaper.

Mr. Musk did not indicate where the cuts would be made. Many Tesla employees are based at four major auto plants in Fremont, California, Austin, Texas, Shanghai and near Berlin. Tesla also has a factory in Buffalo that produces charging equipment and a factory near Reno, Nevada, that makes batteries.

These layoffs could contribute to the United Automobile Workers union’s efforts to organize Tesla employees in the United States. Company workers might be more open to unionizing if they believe representation would provide them with greater job security. Workers at a Volkswagen plant in Tennessee will vote this week on whether to join the UAW, and Mercedes-Benz workers in Alabama will vote next month.

Mr. Musk’s many other ventures and his penchant for polarizing political statements have raised questions about his focus on running Tesla. Wall Street is increasingly concerned about the company: Tesla’s stock price has lost about a third of its value this year.

Many investors had expressed hope that Tesla would revive flagging sales by introducing a car that would sell for around $25,000 as early as next year, increasing the number of people who could afford the company’s cars and meeting competition from Chinese companies that already sell electric vehicles. cars for only half that price.

Mr. Musk cast doubt on those plans when he announced this month that Tesla would unveil a Robotaxi in August. The autonomous taxi is seen as a long-term solution, in part because even the most advanced systems available today sometimes make glaring errors. Additionally, federal and state regulators will need to sign off before Tesla can put such taxis on the road.

This month, Tesla reported a decline in sales that caught investors off guard. The company said it delivered 387,000 cars globally in the first quarter, down 8.5% from a year earlier. It was the first time Tesla’s quarterly sales failed on an annual basis since the start of the pandemic in 2020.

The company significantly reduced prices during 2023 to increase demand, which reduced the profits Tesla made on each car. Last week, Tesla reduced the price of its most advanced driver assistance software, from $199 per month to $99. But the price cuts seem to be losing their effectiveness. Tesla will announce its first quarter financial results on April 23.

Rivals like China’s BYD, Germany’s BMW and South Korea’s Kia and Hyundai Motor reported rising electric vehicle sales over the same period, suggesting slowing overall demand for battery-powered models is not the only explanation for Tesla’s problems.

Established companies are closing the gap with Tesla in battery technology and have built new assembly lines to realize the savings made possible by mass production. Honda plans to begin producing electric vehicles at a factory in Marysville, Ohio, next year.

Hyundai will begin producing electric cars at a new factory in Georgia in October, José Muñoz, president and global chief operating officer of Hyundai Motor, said in an interview last month. Hyundai will also begin allowing its customers to buy cars on Amazon, a response to Tesla’s practice of selling cars online.

Mr. Muñoz said customers were willing to pay more for Hyundai electric cars than for comparable Teslas. “In the beginning, Tesla was premium,” he said. “Now we are premium.”

Jason Karaian And Melissa Eddy reports contributed.

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