Tesla, the electric vehicle giant, is set to lay off more than 10% of its global workforce as part of a cost-cutting measure to increase productivity and prepare for the company’s next phase of growth. CEO Elon Musk announced the decision in a memo obtained by CNBC, citing the need to streamline operations and eliminate duplication of roles.
The news of the layoffs sent Tesla’s shares down 3% on Monday morning, reflecting investor concerns about the company’s performance in a competitive market. Tesla has faced challenges in recent months, with its stock price falling 31% year to date and facing increased competition from other electric vehicle manufacturers.
China’s BYD briefly overtook Tesla as the world’s top EV maker, and Xiaomi announced plans to enter the electric car market with a vehicle priced lower than Tesla’s Model 3. Musk has acknowledged the growing competition in China, where Tesla has a large factory, and has warned that the top car companies in the future may be Tesla followed by Chinese manufacturers.
Despite efforts to boost sales, including discounts and incentives, Tesla reported a decline in vehicle deliveries in the first quarter of 2023. The company’s operating margin also decreased, prompting Musk to announce a reduction in workforce to improve efficiency and innovation.
The layoffs come as Tesla faces logistical challenges, including disruptions in its supply chain and production delays at its gigafactory in Berlin. The company is scheduled to report its first-quarter financial results on April 23, and investors will be watching closely to see how the layoffs and other cost-cutting measures impact Tesla’s performance in the coming months.