Tesla Adapts to Changing Electric Vehicle Landscape with Job Cuts

Tesla, the electric vehicle pioneer, is facing a significant restructuring as it plans to cut over 10% of its global workforce of 140,000 employees.

by Faruk Imamovic
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Tesla Adapts to Changing Electric Vehicle Landscape with Job Cuts
© Getty Images/Brandon Bell

Tesla, the electric vehicle pioneer, is facing a significant restructuring as it plans to cut over 10% of its global workforce of 140,000 employees. This decision follows a period of rapid expansion where the company's workforce nearly doubled since 2020.

The move is part of a broader trend affecting the electric vehicle industry, characterized by heightened competition and fluctuating demand.

Addressing the Challenges

In an internal email revealed by Reuters and first reported by Electrek, CEO Elon Musk explained the rationale behind the layoffs.

"We have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally," Musk wrote. The email highlighted the need for "cost reductions and increasing productivity" but stopped short of discussing the slowing demand for electric vehicles or Tesla's recent sales performance.

The context for these cuts becomes clearer when considering Tesla's recent market performance. The company experienced its first year-over-year decline in sales during the first quarter of this year since the pandemic's peak four years ago.

Notably, Tesla briefly lost its lead in global EV sales to Chinese automaker BYD in the last quarter, although it regained the title in the following quarter despite the sales drop. Other industry players, including General Motors and Ford, have also scaled back their EV production in response to softer demand than expected.

Despite these challenges, overall EV sales continue to grow industry-wide, with U.S. sales increasing by 40% last year, surpassing one million units for the first time.

Tesla's Expansion and Future Plans

While facing staffing and sales challenges, Tesla continues to expand its global presence.

The company opened new factories in Germany and Texas in 2022 and announced plans for a new plant in Mexico last year. However, the rate of headcount growth has decelerated, with a less than 10% increase in 2023, a stark contrast to the 40% and 29% growth in 2021 and 2022, respectively.

This is not the first instance of Tesla implementing staff reductions. The company previously announced a 7% cut in 2019 and a 10% reduction in salaried staff in 2022, even as it continued hiring hourly employees. Unlike the earlier reductions, neither Musk nor Tesla has confirmed the recent layoffs publicly.

The company, which operates without a public relations staff, remained unresponsive to requests for comments on the cuts. Tesla's shares, which have already declined by 31% this year, fell an additional 3% following the news of the job cuts. This market reaction underscores the broader challenges facing the company and the electric vehicle sector at large.

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