Tesla (NASDAQ:TSLA) has announced a significant reduction in staff following a disappointing Q1 delivery report, echoing moves by other automakers and EV manufacturers, as indicated in an internal memo.
CEO Elon Musk confirmed in an email that the company would undergo a “more than 10%” reduction in headcount, aligning with prior reports suggesting layoffs could affect up to 20% of staff.
“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,” Musk wrote, emphasizing the necessity of the decision.
With Tesla’s global headcount at approximately 140,000 workers, the reduction is expected to impact at least 14,000 employees. Tesla stock dipped in early trading following reports of the layoff memo.
The layoffs coincide with a disappointing Q1 delivery report, where Tesla missed consensus estimates and accumulated excess vehicle supply exceeding 46,000 units. This suggests the company is grappling with slowing EV demand, both domestically and internationally, marking its first year-over-year quarterly decline in deliveries since 2020.
Renowned Tesla bull Dan Ives at Wedbush Securities interpreted the layoffs as a negative indicator for Tesla’s future prospects. “This is an ominous signal that speaks to tough times ahead for Tesla as Musk navigated this Category 5 storm,” Ives commented, underscoring the challenges posed by softening demand and a more subdued growth outlook.
Despite concerns, not all of Wall Street perceives the layoffs negatively. CFRA analyst Garrett Nelson sees the announcement as a reflection of the broader industry trend amid slowing EV growth rates. “We view the announcement as a sign of the times, but the fact Tesla is taking action to reduce costs amid the slowdown should be positive for the bottom line,” Nelson remarked.
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