Turbulent Times Ahead For Tesla After Company Layoffs

Tough times have befallen Tesla, as the company has laid off more than 10% of its workforce in order to cut costs. This also includes the departure of two senior executives who have been with the company for 8 years and 18 years, respectively.

These job cuts, amounting to around 14,000 employees in total, come at a time when the company is facing increased competition, declining sales, and a drastic drop in demand. 

Management changes and layoffs are a critical reminder of the unpredictable nature of Elon Musk at this important time for the company. Earlier in the month, the Tesla CEO announced a full focus on the self-driving robotaxi, while discounting the plans for the affordable Model 2 vehicle. 

Elon Musk has not announced any plans to reverse the decline in car sales, nor compete with established American competitors and new Chinese Rivals overtaking market share by the month. 

What does this mean?

Investors often love to welcome job cuts as this represents a decrease in labor costs which often leads to higher profits for a company. However, this was not the case with Tesla as shares slide down more than 5% when the news was announced. 

Tesla has culled their workforce before, notably a big cut in headcount in 2018. However, typically this was an effort by the company to remove low performing managers and employees and the size of the cuts have been a lot smaller. 

With such an eye for optimization, Elon Musk loves to cut out redundant or unnecessary headcount from his company, yet this time around high performing employees were entered into the mix which is a bad sign for the company.

It is clear that the poor delivery numbers in Q1 has created a massive bottleneck for the company and a problem that will be difficult to dig out of. 

Elon Musk’s solution to the poor metrics is to take a gamble and go all in on the robotaxi network. Only time will tell if this solution is the correct one for Tesla.