As Tesla Lays Off 10 Percent Of Staff, Stock Plummets, Top Execs Quit

An aging lineup of models, increased competition from China and other US manufacturers, cooling demand from consumers due to prices as well as uncertainty about charging station availability - and Musk's penchant for provocative political statements which alienate Tesla's most likely buyers have all contributed to a decline in demand which has affected sales and profits. JL 

Rebecca Elliott and colleagues report in the Wall Street Journal:

Tesla plans to slash more than 10% of its global workforce and two of Elon Musk’s top deputies said they were leaving the company, a shake-up that reflects a broader cooling demand for electric vehicles. Tesla stock fell Monday morning. Tesla's shares were down 3% as broader markets rose. Tesla’s stock closed down more than 5% Monday. It has fallen 35% in 2024. Tesla this month reported its first year-over-year decline in quarterly deliveries since 2020, stoking concern about the company’s prospects. Tesla delivered 387,000 vehicles globally in the first three months of 2024, down 8.5% from a year earlier. The company has an aging lineup and faces fierce competition, especially in China.

Tesla TSLA -5.59%decrease; red down pointing triangle

 plans to slash more than 10% of its global workforce and two of Elon Musk’s top deputies said they were leaving the company, a shake-up that reflects a broader cooling in consumer demand for electric vehicles. 

The changes revealed Monday come as the world’s most valuable automaker—long valued by Wall Street for its growth potential—adjusts to a weaker market for its battery-powered cars.

Tesla stock fell Monday morning following reports that the EV maker would cut more than 10% of its global workforce.

Tesla's shares were recently down nearly 3% as broader markets rose. The stock was down more than 30% year-to-date through Friday's close.

Tesla’s once-enviable profit margins have also narrowed in recent quarters as the company has resorted to deep price cuts to stimulate sales. Of late, it has leaned into efforts to develop autonomous cars.

Musk, the company’s chief executive, informed employees Monday of the planned job cuts, according to an email reviewed by The Wall Street Journal. He cited the need to reduce costs and increase productivity.

Hours later, Drew Baglino, a senior vice president and 18-year company veteran, posted on X saying he had made the “difficult decision” to leave Tesla. 

Baglino, who was one of just four named executives on Tesla’s website, had been a stabilizing force in a company known for high executive churn. As the head of powertrain and energy engineering, he frequently appeared alongside Musk and oversaw initiatives including Tesla’s efforts to manufacture its own battery cells. The 43-year-old Baglino was named to the company’s leadership team in 2019. 

Another top executive, Rohan Patel, 42, who oversaw policy and business development, also posted on X Monday bidding colleagues farewell. Musk, in a reply, thanked him for “everything you’ve done for Tesla.” 

The two executive departures follow the exit of Zach Kirkhorn, who stepped down as chief financial officer last summer and had been discussed as a possible successor to Musk as CEO.

Tesla’s stock closed down more than 5% Monday. It has fallen roughly 35% in 2024.

“About every 5 years, we need to reorganize and streamline the company for the next phase of growth,” Musk said on X.

As the electric-vehicle market has cooled, Musk has pushed to increase adoption of a souped-up version of the company’s driver-assistance software called “Full Self-Driving.” The promise of this technology—and the hope that the company will one day develop fully autonomous vehicles—has underpinned Tesla’s lofty market valuation. 

Employees recently were told to give priority to a robotaxi project, the Journal has reported. 

Tesla had more than 140,000 employees globally as of the end of 2023, according to a securities filing. 

Tesla earlier this month reported its first year-over-year decline in quarterly deliveries since 2020, stoking concern about the company’s prospects this year. The EV maker delivered around 387,000 vehicles globally in the first three months of 2024, down 8.5% from a year earlier. It was the company’s lowest quarterly performance since the third quarter of 2022.

Tesla has shown signs of stress as growth in the overall EV market is slowing and automakers are scaling back investment plans. The company has an aging lineup and faces fierce competition, especially in China where homegrown EVs have become more popular.

China’s BYD briefly surpassed Tesla as the world’s largest EV seller in the fourth quarter of last year, though Tesla has since reclaimed the title.

Tesla executives have described the company as being between two growth waves: the first driven by the company’s popular Model 3 car and Model Y crossover, and the second by its next generation of vehicles.

 

This next generation has been expected to include both a robotaxi and a less expensive model designed to extend Tesla’s reach into the mass market. 

Musk said in his email that remaining workers face a difficult job ahead as Tesla is developing “some of the most revolutionary technologies in auto, energy and artificial intelligence.”

Baglino, like other Tesla executives, was compensated largely with stock in the carmaker. Since becoming an officer, he has sold more than $130 million of Tesla shares, according to Equilar. As of Friday, he held shares and vested stock options valued at more than $113 million, Equilar said.

Analysts are looking for more clarity on Tesla’s strategy, noting that a lower-cost car is important for the company’s near-term growth. A robotaxi, which Musk has said Tesla plans to reveal in August, could have a longer adoption curve.

Morgan Stanley analyst Adam Jonas wrote in a recent research note: “While we are prepared for Tesla to unveil an actual physical robotaxi-prototype this summer, we would urge caution on potential commercialization time-lines for a fully autonomous taxi service.”

Tesla had more than 140,000 employees globally as of the end of 2023. PHOTO: CFOTO/ZUMA PRESS

In China, the number of Tesla’s vehicles both made and sold in the country slid for two consecutive quarters from a year earlier, based on data from the China Passenger Car Association.

Senior managers in China said they were told by the company in recent months to identify roles that are critical to their teams. Some of them said they were asked to rank their team members in order of performance.

Tesla also made a sweeping round of layoffs in 2022, when Musk told employees he planned to cut 10% of salaried workers.