In a memo to employees, Tesla CEO Elon Musk revealed plans for a significant reduction in the company's workforce, exceeding 10% globally. The move aims to streamline operations and boost productivity as Tesla gears up for its next phase of expansion.
Musk emphasized the necessity of scrutinizing every aspect of the organization to achieve cost efficiencies while maintaining innovation. Despite the challenging decision, he expressed confidence that a leaner structure would better position Tesla for future growth opportunities.
The announcement comes amid a challenging period for Tesla, marked by a 31% year-to-date decline in its shares. Despite the continued popularity of electric vehicles worldwide, Tesla faces heightened competition, including from Chinese manufacturers like BYD and Xiaomi.
Concerns over Tesla's market dominance have prompted reflections from Musk himself, who acknowledged the rising prominence of Chinese carmakers in the industry. Additionally, some potential customers have expressed reservations about Tesla due to Musk's controversial remarks.
Tesla recently reported its first annual decline in vehicle deliveries since 2020, citing logistical challenges and supply chain disruptions. The company also adjusted the pricing of its Full Self-Driving option, diverging from previous promises to raise fees as the system expanded.
Looking ahead, Tesla warns investors of potentially lower vehicle volume growth this year compared to previous years. Operational hurdles, including supply chain disruptions and production halts, have added to the company's challenges.
Tesla is scheduled to release its first-quarter financial results on April 23, with investors keenly observing the impact of recent developments on the company's performance.
In his memo, Musk expressed gratitude to departing employees for their contributions while urging remaining staff to remain steadfast amid the evolving landscape. He highlighted Tesla's commitment to pioneering technologies in automotive, energy, and artificial intelligence.
The workforce reduction underscores Tesla's proactive approach to adaptability and efficiency in an increasingly competitive market environment.
[Correction: An earlier version incorrectly stated Tesla's fourth-quarter operating margin decline. The correct figure is 8.2%, down from 16% a year earlier.]
The full memo from Musk:
"Over the years, we have grown rapidly with multiple factories scaling around the globe. With this rapid growth there has been duplication of roles and job functions in certain areas. As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity.
As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.
I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission and we wish you well in your future opportunities. It is very difficult to say goodbye.
For those remaining, I would like to thank you in advance for the difficult job that remains ahead. We are developing some of the most revolutionary technologies in auto, energy and artificial intelligence. As we prepare the company for the next phase of growth, your resolve will make a huge difference in getting us there.
Thanks,
Elon"