Tesla, the world's largest electric vehicle manufacturer, announced a major layoff plan yesterday, with more than 10% of its workforce, around 14,000 employees, being affected. This news caused Tesla's stock price to fall by more than 5.5% in overnight trading on Monday.
In the layoff letter, Tesla's CEO Elon Musk emphasized the importance of reducing costs and improving efficiency. This marks Tesla's fifth major layoff since 2017, with previous rounds occurring in 2018, 2019, and 2022, cutting 9%, 7%, and 3% of its workforce respectively.
Tesla has seen a significant increase in its workforce over the past few years, growing from 38,000 employees at the beginning of 2018 to 140,000 by the start of 2024. However, facing the challenge of persistently weak demand for electric vehicles, Tesla was forced to take layoff measures.
Tesla's first-quarter deliveries suffered a severe setback, with delivery numbers falling 8.5% year-on-year, well below analysts' expectations, and marking the largest deviation from forecasts on record. This result was described by analysts as "an inexplicable disaster," also suggesting that Tesla might struggle to meet Wall Street's lowered profit expectations for the first quarter.
The news of the layoffs also raised investor concerns about Tesla's future succession plans. One of Tesla's key executives, Drew Baglino, a Senior Vice President with 18 years of tenure overseeing the engineering and technology development of Tesla's batteries, motors, and energy products, announced his resignation. Rohan Patel, a Vice President responsible for public policy and business development, also announced his departure. Consequently, Tesla's stock fell by more than 5.5% in overnight trading on Monday.
Analysts point out that Baglino's departure could impact Tesla's battery technology and product development, increasing some investors' uncertainty about Tesla's succession plans. Meanwhile, Musk stated that he would prefer to develop products elsewhere unless he could obtain about 25% voting control of Tesla.
