Behind Tesla's massive layoffs

On April 15, local time, Tesla's Musk issued a letter to all employees, announcing that Tesla would lay off 10% of its employees worldwide. Musk also wrote in a letter to internal employees: "Profit is obviously not the motivation for Tesla's layoffs, but Tesla needs to reduce costs and make money." In other words, the layoffs are aimed at reducing costs and increasing productivity, preparing the company for the next phase of growth.

It is reported that this round of layoffs will officially start this Sunday local time. Tesla engineers from Austin, Fremont and other places also revealed to the media that there has been news within the company that layoffs are about to begin.

Musk has issued an email to company executives suspending all hiring worldwide, saying that Tesla needs to cut about 10% of jobs based on the pessimistic outlook for the economy, while increasing the number of hourly workers. In a later email, Musk further revealed that the layoffs would not apply to any employees who actually make cars, battery packs, or install solar products. This means that many managers will face the fate of being laid off, but not the workers on the front lines.

Therefore, the largest layoff in history launched by Musk laid off personnel in marketing, marketing and other departments, and the production and manufacturing system did not move. This approach has also sounded the alarm for other new energy vehicle companies. According to a number of media sources around the world, several reports from Tesla employees show that this round of layoffs may involve up to 20% of employees, and will be as many as tens of thousands.

In fact, Tesla's current round of layoffs is not sudden. As recently as February of this year, the company postponed performance reviews for some of its employees. Foreign media reported on February 8 that Tesla seems to be preparing for a new round of layoffs, and the company requires all managers to conduct a "binary evaluation" of their subordinates to determine which positions are critical to the company's operations.

In addition, according to 3 sources, the above work was later "rescheduled". In terms of recruitment, Tesla's hiring pace has slowed down in recent years: the number of new employees at Tesla was 29,000 in 2022, and it has dropped to 12,000 in 2023, a decrease of more than half.

In fact, it is not uncommon for Tesla to make large-scale personnel changes under the condition of operational passivity. In addition to the resignation of nearly 17 executives in 2017, Tesla lost two important executives in the new energy department in May 2018, which is undoubtedly a huge talent loss for Tesla. Just one day before Tesla announced the layoffs, Drew Baglino, the head of the company's battery department, officially announced his departure. He joined Tesla in 2006 and is responsible for leading the 4680 battery project.

Tesla is a well-deserved leader in new power car manufacturing, but the fact that it has been losing money for 15 consecutive years will inevitably pour cold water on the current hot new car companies.

According to public information, Tesla released its production and sales data for the first quarter of 2024 in early April: a total of 386,810 vehicles were delivered, a year-on-year plunge of 8.5%, and a quarter-on-quarter decline of 20.1%. This is also the first time since 2020 that Tesla's deliveries have seen a quarter-over-quarter decline. Analysts on average expect Tesla to deliver about 457,000 vehicles, with forecasts ranging from 414,000 to 511,000 units, and actual sales are below the minimum standard. This data brings Tesla's production back to the level of the second half of 2022.

From the perspective of Tesla's competitors, with the release of the Chinese-made Xiaomi SU7, the competition in the new energy vehicle market is becoming more and more fierce. As a result, even Tesla, the industry leader, is not immune.

Under the current weak economic situation, the wave of layoffs of major Internet companies has already taken the lead, and now Tesla has started the mode of layoffs of car companies, which cannot but be said to be a precursor. For other new energy vehicle companies around the world, the pressure is huge. Facts have proved that how to retain high-tech talents, maintain the innovation vitality of enterprises, reduce production costs, and enhance cohesion and centripetal force is the way to change and survive enterprises. As for whether Tesla's experience can reasonably avoid risks, it remains to be seen further.