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Tesla layoffs: Sign of trouble or a strategic move?

Tesla layoffs: Sign of trouble or strategic move?
Tesla layoffs: Sign of trouble or strategic move?

Tesla is grappling with a stock rollercoaster and dwindling electric vehicle (EV) sales in an intensifying price war. Amidst this, the company announced on Monday it will lay off more than 10% of its global workforce. 

The question on everyone’s mind is this: Is this a sign of trouble for the EV giant or a strategic maneuver for Tesla to reposition itself?

Tesla’s layoffs 

As reported by Electrek first, employees at the Gigafactory in Texas were told the focus would shift from Cybertruck production “amid rumors that it is preparing a round of layoffs.” The following day, CEO Elon Musk shared the “difficult decision” in a company-wide email

In the email (shared by employees on Reddit), Musk says Tesla has “grown rapidly with multiple factories scaling around the globe.” This has led to “duplication of roles and job functions in certain areas.“ 

The billionaire founder adds: “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.” 

He thanked those departing the company for their years of hard work. “There is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase cycle.” 

‘Routine streamlining’

As reported by Victoria Waldersee, autos correspondent at Reuters, Musk claims routine streamlining must occur “every five years […] to optimize growth.” However, as Waldersee points out, the last round of layoffs took place in June 2022 – just 18 months ago. 

At the time, Musk said he had a “super bad feeling” about the state of the economy. He called on Tesla executives to halt hiring worldwide. This coincided with Musk telling staff to “return to the office or leave.” 

WATCH: ‘Return to the office or leave’

Fast forward to 2024, Tesla also failed to inform labor representatives at its German plant of the layoffs. According to Dirk Schulze, the head of the IG Metall union, companies have a “legal obligation […] to inform the works council” before layoffs are announced to staff. 

‘No growth’ at Tesla

In March, Wells Fargo analyst Colin Langan said Tesla is a “growth company with no growth.” Langan said sales will continue to slow throughout 2024, before “dropping significantly” in 2025. 

Tesla has been facing severe competition as other industry giants line up for a piece of the EV pie. XPeng, based in Guangzhou, China has ambitious plans to go global, while Huawei is taking over with its “comprehensive ultra-fast charging.”

ALSO READ: Fast EV charging: Huawei takes on Tesla in China

On US soil, South Korean automotive brands Hyundai and Kia are fast becoming proactive players with budget-friendly cars and robust growth strategies. 

Speaking to Fast Company, Cox Automotive director Mark Schirmer says his team “certainly expected” Tesla’s shares to erode. “No one expected Tesla to hold onto its 75%-plus share of the EV market once everyone else piled in. And they are piling in.”

About the author

Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.

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