Tesla to cut global workforce by over 10% amid cost-saving measures, shares drop

Tesla CEO Elon Musk has announced that the company will be laying off more than 10% of its global workforce as part of a cost reduction effort to increase productivity and prepare for the next phase of growth.

Stock Performance and Market Challenges

Following the announcement, Tesla's shares experienced a 3% decline on Monday morning. This decision comes amidst a challenging period for the company, as its shares have fallen by 31% year to date. While electric vehicle sales continue to grow globally, Tesla's sales growth rate has slowed, and the company now faces increased competition.

Market Competition and Sales Decline

By the end of 2023, China's BYD briefly overtook Tesla as the world's top EV maker, and other companies, including Xiaomi, have entered the electric car market with competitive offerings. This has led to a decline in Tesla's vehicle deliveries and slowed production, with first-quarter deliveries falling by 8.5% compared to the previous year.

Challenges and Adjustments

Tesla recently reduced the subscription price of its premium driver assistance system and warned investors that vehicle volume growth for the year "may be notably lower." The company also faced logistical challenges, including disruptions in component supply due to maritime attacks and a temporary production suspension at its gigafactory near Berlin.

Financial Outlook

Tesla will report its first-quarter financial results on Tuesday, April 23. The company's operating margin has decreased to 8.2% in the fourth quarter, down from 16% in the previous year, raising concerns about its financial performance.

Message from Elon Musk

Elon Musk expressed gratitude for the departing employees and emphasized the importance of the remaining workforce in driving the company's 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," Musk said.