Tesla lays off 10% of its global staff

More bad news for Tesla. After its worst quarter results since the pandemic, the EV maker is cutting its workforce by roughly 10%, or about 14,000 people. The company cites “hiring inefficiencies over rapid growth”, but heads are rolling over some key projects as well.

The worldwide headcount of Tesla is 140,473 people. Citing the overaccelerated growth seems somewhat badly timed, as the workforce has been growing stronger in previous phases. However, as Tesla aims to produce 2 million units annually, its workforce isn’t exceptional compared to its competitors. Audi, for instance, features a headcount of 90,000 people for the same annual output, but can rely on Volkswagen’s resources. BMW employs 155,000 people.

“Duplication of roles”

According to Musk there’s redundancy over different people tasked with the same work. The company has asked its managers to identify critical members. The official memo, signed by the CEO, reads: “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.”

The drastic measure follows in the footsteps of other electric startups (though Tesla is much more established, with operations starting back twenty years ago). Last year, Polestar announced similar measures, cutting 15% of its headcount or 450 people. Arrival cut half of its staff in order to save its business.

But the situation for Tesla is different. After years of soaring delivery growth – with a crisis like Corona as an exception – in which it struggled to find enough hands to build cars, it faces different market conditions today.

With a stagnating global EV share and a partly self-inflicted price war in China, an inventory of unsold models is building up. This is unusual for the brand, which saw deliveries decline by 9% since the beginning of the year. The management points to external factors to explain the downturn, but the problem is much more widespread.

Reshuffle management?

The subsequent sacrifices are strategically decisive. Despite CEO Elon Musk’s denial, it has been confirmed that the project of an affordable smaller EV is in the fridge. As a long-time devoted pioneer, this will veer the company off its initial course and lend the established competition (Renault, Volkswagen, Hyundai, etc.) an advantage.

Meanwhile, the company is leaning back on the broad lay-off round to reshuffle projects it was dissatisfied with. The Vice-President of Powertrain and Engineering Baglino, who oversaw the heavily delayed roll-out of 4680 cells, has been ousted from his job. However, it remains unclear if this happened on his own initiative.

Similarly, the manager for the factory supplying cathode materials for the group (under construction) has also been laid off, as Musk wasn’t happy with the progress. Elon Musk expressed a personal dislike for the necessity of cutting staff: “ There is nothing I hate more, but it must be done.”