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Tesla has been on a tear in recent years, with vehicle sales increasing steadily since 2020. The company’s early lead in electric vehicles pushed its stock price into the stratosphere and made CEO Elon Musk the world’s richest man. However, Tesla may now be at a turning point after seeing its first sales decline since before the pandemic. Tesla’s response to the drop is severe—the firm has announced it will lay off at least 10% of its workforce, about 14,000 people.
Musk has claimed on X (formerly Twitter) that there is nothing amiss here. “About every 5 years, we need to reorganize and streamline the company for the next phase of growth,” Musk said. He’s not wrong about the company’s history of layoffs, but he’s underselling the frequency. The company announced rounds of layoffs in 2017, 2018, 2019, 2022, and 2023. However, these usually affected smaller numbers of workers, somewhere in the range of 2-7% of salaried employees. In one instance, layoffs were limited to a single facility where workers voted to unionize.
As part of the layoffs, long-time Tesla SVP Drew Bagliano is leaving, as is the company’s head of policy, Rohan Patel. These key departures suggest the new round of layoffs could cut much deeper than previous “streamlining” efforts. Tesla kept the language vague by saying “more than 10%” of its workforce would get the ax. So, we could eventually see more than 14,000 Tesla employees out of a job.
Tesla’s disappointing Q1 shipments have sent its stock price into a tailspin—it has already given up all its growth from the past year, and it has yet to stabilize. Despite spending years developing the Cybertruck, buyers are lambasting the vehicle for numerous build quality and design issues. Meanwhile, Tesla has canceled the long-awaited Model 2 budget sedan due to fears it would not be competitive with cheap Chinese EVs from BYD and others. The Model 2 project will reportedly be revamped as a robotic taxi.
With no new products on the horizon to turn the sales slump around, it looks like Musk has turned to layoffs to appease investors and board members. It’s a common business tactic but one that often sets up greater challenges down the road. Tesla will lose a lot of institutional knowledge in the layoffs, and production will slow. Some of the company’s factories will reportedly reduce the number of shifts they run, producing fewer vehicles. Still, the company’s financials will look better in its next quarterly reports.