Tesla job cuts: workers in U.S. and China, 'some really good players too'

Apr 18, 2024 by admin

Tesla's global job cuts include reducing staff in the U.S. and China, the automakers' two biggest markets, across sales, tech, and engineering, five sources briefed on the matter said. The cuts also reportedly included high-performing employees. And according to one report, some Tesla workers discovered they were out of a job when their badges wouldn't scan.

CEO Elon Musk on Monday told staff in an internal memo seen by Reuters that the company is laying off more than 10% of its global workforce, as it grapples with falling sales and an intensifying price war for electric vehicles.

A company source told TechCrunch that managers told their employees the layoffs -- 20% in some departments -- were largely due to poor financial performance.

The layoffs come just a week before Tesla reports first-quarter earnings. Its profit margin has narrowed over the past few quarters, the result of an EV price war that Tesla itself kicked off, with its margins taking a hit. Global vehicle deliveries in the first quarter fell for the first time in nearly four years, as price cuts failed to stir demand.

Several U.S.-based service centers saw heavy layoffs effective immediately, primarily of sales staff and technicians, one source told Reuters. Another location laid off all front-of-house staff, the source said. A Tesla program manager in California posted a spreadsheet on LinkedIn of over 140 staff, mostly engineers, who had been laid off and were seeking new jobs.

Business Insider reported that at Tesla's factory in Sparks, Nevada, workers faced a two-hour line Monday morning to get into the facility as a result of badge checks, one worker said. The security team was scanning the badges of workers coming out of the shuttles that ferry people between the factory and nearby parking lots, said two current Tesla workers who requested anonymity. Workers who had been laid off were diverted to separate vans, the two workers said.

Three former Tesla employees said workers at the Fremont factory were told by security that if their badges didn't work they were no longer employed.

The stock tumbled about 4% to below $154 at one point on Tuesday in New York, bringing this year’s drop to some 38%. Tesla shares are the second-biggest decliner on the S&P 500 Index in 2024, erasing more than $290 billion in value since year-end. The company hasn’t closed with a market value under $500 billion since late April of last year.

“The sweeping layoffs announced yesterday, amounting to a reduction in crewed production capacity, should now leave no doubt that the decline in deliveries has been a function of lower demand and not supply,” said Ryan Brinkman, an analyst at JPMorgan Chase & Co. 

High performers cut

Many of the laid-off employees were high performers, according to two sources who spoke to TechCrunch on condition of anonymity. One source expressed shock at the number of talented employees cut and noted that many of those affected were working on projects that have fallen lower on Tesla's priority list. The source declined to specify which projects.

Some departments saw layoffs beyond the 10% outlined in the companywide email, according to sources. One manager told TechCrunch that 20% of their employees were cut.

"I lost 20% of my team, some really good players too," they said.

The shakeup also comes as Musk continues to bend the company's trajectory toward building fully self-driving cars. Tesla recently dropped plans to build a lower-cost EV that would retail starting at around $25,000, opting instead to use the underlying platform being developed to power an alleged robotaxi that Musk said will debut August 8.

Musk previously tried to prioritize the dedicated robotaxi vehicle project, according to his biographer, Walter Isaacson. In 2022, he told employees that he wanted a "clean robotaxi" with no steering wheel or pedals. Tesla lead designer Franz von Holzhausen and engineering VP Lars Moravy kept running the low-cost EV project in secret and eventually convinced him to make both -- that is, until last week when it was reported that Musk changed his mind.

Overseas layoffs

Two sources said members of Tesla's China sales team were being notified they were being made redundant, at a level higher than 10%. A third source said that in Shanghai, where Tesla's largest plant is located, the company will only lay off a small proportion of staff, just "several dozen" people.

Tesla's U.S. headquarters and its China unit did not immediately respond to requests for comment. All the sources declined to be named as they were not permitted to speak to media.

Tesla Germany refuted reports in German media that 3,000 of the carmaker's roughly 12,000 staff had been fired, and said it was evaluating how to implement Musk's orders at the plant.

"We will pursue the measure for Gigafactory Berlin-Brandenburg against the background of all labour law and co-determination requirements, bringing in the works council," Tesla Germany said on Tuesday in an e-mailed statement to Reuters, adding no workers had been notified yet.

German union IG Metall on Monday said that Tesla had not informed or consulted the works council, as is customary in Germany, prior to emailing all staff.

While German labor law has strict rules on firing staff, around 1,000 workers at the plant are on temporary contracts, according to a source with knowledge of the matter, leaving them more vulnerable to dismissal.

Tesla faces increasing competition in China in a fierce price war with rivals led by BYD, slowing sales in the United States, as well high investment costs in new models and artificial intelligence.

Top execs leave

Two high-profile executives -- Drew Baglino, Tesla's SVP of Powertrain and Energy, and Rohan Patel, VP of Public Policy and Business Development -- also left the company.

Patel told TechCrunch he decided Sunday evening to leave Tesla because of "[b]ig overall changes" at the company. Patel, who had been engaging regularly with Tesla customers and fans on X in recent months, declined to be specific. He noted in a message that it would be "Better for me not to speculate." "Tesla is going to be stronger than ever, and change is good," he added.

Baglino told TechCrunch that after 18 years it was time to leave Tesla. "I feel good about the impact I've been able to achieve, my leadership team is strong, the energy businesses I'm responsible for are doing well, etc.," he wrote in a message to TechCrunch.

Includes Reuters, TechCrunch, Business Insider and Bloomberg


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