Tesla will lay off more than 10% of employees worldwide

Tesla is preparing to lay off more than 10% of its global workforce after weak first-quarter deliveries and growing competition in the electric vehicle market.

Layoffs at Tesla

Tesla will lay off more than 10% of employees worldwide. A leaked internal email from CEO Elon Musk says the automaker is looking to cut costs and improve productivity after years of rapid growth that have led to duplication of some roles and functions in certain areas of the company.

As of December 2023, the world's largest automaker employed more than 140 thousand employees worldwide. The announced staff cuts will affect about 14,000 people.

The layoffs were reported after Tesla told managers to identify critical team members, suspended some stock pay, canceled annual reviews of some employees and cut production in Shanghai.

According to TechCrunch , many of the laid-off employees were high performers. Many of those affected were working on projects that were lower on Tesla's list of priorities. It is noted that the number of layoffs exceeded 10%, and some departments lost up to 20% of their employees.

The company also laid off 4% of its New York workforce in February 2023 as part of a performance review cycle and ahead of a union campaign.

Reasons for layoffs

Among the reasons are the following.

The automaker has faced an escalating price war in China, a key market for Tesla, as low-cost rivals such as BYD and Xiaomi have forced it to cut prices and squeeze margins. Additionally, Tesla produced many more vehicles than it sold last quarter.

In the first quarter, the company produced 433,371 vehicles but shipped only 386,810, adding to excess inventory by more than 40,000 EVs. For these reasons, Tesla has reduced the price of unsold Model Y SUVs in the US by $7,000 and the cost of a self-driving software (FSD) subscription to $99.

Tesla said this month that global vehicle deliveries fell in the first quarter for the first time in nearly four years as price cuts failed to stimulate demand. The electric vehicle maker has been slow to update its aging models as high interest rates have sapped consumers' appetite for big-ticket items while rivals in China roll out cheaper models.

Tesla also canceled the release of a long-promised budget car that investors were counting on to stimulate growth in the mass market. Musk denied the report, but did not comment on the situation.

In the fourth quarter, Tesla recorded a gross profit margin of 17.6%, its lowest in more than four years. The company blames the arson of a plant in Germany and supply disruptions caused by Houthi attacks in the Red Sea.