Why Is Tesla Laying Off 10% of Its Workforce?

Tesla is the world’s largest electric vehicle (EV) manufacturer, but it has recently faced setbacks. Now, the automaker says it will cut about 10% of its workforce. 

What sparked the recent Tesla layoff? Automotive industry reporters have commented on the job cuts and indicated the causes. 

Here’s what we know about the most recent Tesla news.  

What Has Driven the Recent Tesla Layoff? 

The first quarter of 2024 has brought unwelcome news for Tesla employees and shareholders. End-of-quarter reports indicate the EV manufacturer saw an 8.5% decline in deliveries compared to 2023, producing just over 433,000 vehicles. Wall Street investors expected Tesla to deliver over 450,000 cars, so the automaker fell behind expectations. 

This news broke the first week of April, leading to a further decline in Tesla stock. Shares of the Texas-based EV manufacturer have fallen 33% since January, indicating the company’s growth has slowed. 

Following the first-quarter report, Tesla has planned to lay off a portion of its worldwide workforce. An April 15 memo from CEO Elon Musk explains what’s happening with the company. In the letter, Musk tells employees that Tesla will reduce its workforce by 10% to reduce costs and increase productivity. 

Tesla employees work at its headquarters in Austin, Texas, and its numerous factories nationwide. Additionally, the automaker has offices and factories in Germany, Canada and China. The company employed about 140,000 people as of late 2023, so expect about 14,000 impacted jobs worldwide in this round of layoffs.  

Price Cuts

What signs led to this layoff at Tesla? First, consider what the manufacturer said in January. Musk said 2024 deliveries would be lower than 2023 when it sold a record 1.8 million vehicles. 

2023 was a booming year for Tesla, as it saw a 40% increase compared to its 2022 numbers. 

The outlook was rosy until late 2023, when the renowned EV automaker started cutting prices. A backlog of Model Y SUVs led Tesla to cut the price tag by $5,000 or more to mitigate the surplus. Tesla may have overestimated vehicle demand and is looking to shore up losses in 2024. 

What’s Next for Tesla After the Layoff News?

As Musk said in the memo, Tesla is heading in a new direction as it searches for new opportunities in the automotive world. One area to keep an eye on is Tesla’s Redwood project. Reports show this Tesla model could debut in 2025 and introduce a more affordable EV for consumers. 

What would this model look like? If it comes to fruition, the Redwood project will produce a compact crossover and be Tesla’s first mass-produced vehicle. The Teslarati report also says the EV would cost around $25,000, becoming one of the most affordable electric machines on the market. This price tag would make it cheaper than the Chevrolet Bolt, opening the door for consumers who want to get their foot in the electric door. 

Robotaxi Anticipation

Redwood is only one part of Tesla’s reported plan for the next generation of vehicles. While the Y, 3, S and X models have succeeded, the company is pivoting in a new direction following the layoffs. Another project that could come to fruition is the robotaxi. 

This proposed EV would have no steering wheel or pedals, thus buying into the concept of autonomous vehicles. Robotaxi owners would send the car to pick up their groceries and run errands without a driver. 

Musk reportedly is all in with the robotaxi, pushing all his chips to the middle by spending billions on NVIDIA technology. The Tesla CEO wants to focus on the robotaxi instead of the Redwood project for the foreseeable future. When will consumers see the low-price EV in Tesla showrooms? Don’t expect these electric cars to roll off production lines in 2024. 

What Do the Layoffs Mean for the EV Market?

The recent Tesla layoffs are one symptom of a larger recent trend — the decreasing demand for EVs. 2020 through 2023 saw a jump from 300,000 units sold to 1.6 million in the United States. Consumers were eager to purchase EVs and lower their carbon footprint. However, the automotive industry predicts a slowdown will occur in 2024.

For example, General Motors (GM) CEO Mary Barra said the slowing pace of EV growth will mean the company’s brands will build to demand and reduce current production. Similarly, Ford will build fewer F-150 Lightning and Mustang Mach-E units because the demand isn’t what the auto manufacturers thought it would be. 

Have Other Automakers Laid Off Workers?

Price cuts and a mass layoff are not exclusive to Tesla. Other automakers building EVs have announced job cuts due to market conditions. For instance, Ford laid off about 700 employees last October in its Dearborn, Michigan, plant. These workers built the Ford F-150 Lightning, so cooling EV demand is one reason why Ford laid them off. Sales for the electric truck fell nearly 50% in 2023 compared to 2022, prompting the manufacturer to make changes. 

In December, GM announced a 1,300-employee layoff at plants producing Chevrolet and GMC EVs. The Orion and Lansing Grand River facilities produce the Bolt EV, Bolt EUV Crossover, Silverado EV and Sierra EV. However, the company said it would postpone its production of electric pickups into 2025. 

Understanding the Tesla Layoff News

The automotive industry has seen massive changes in the last few years. EV demand has risen and fallen sharply, affecting the nation’s largest automakers. Tesla is the most recent domino to fall, with dipping sales and demand the leading reasons for these cuts. 

Industry insiders and those interested in investing in these vehicles should monitor market conditions to see if the trend continues or reverses. This will shine a light on what to expect in the future.