Stock price crash: Tesla's layoff effect is beginning to show?

On April 16th local time, Tesla's US stock market plummeted by 5.59% to close at $161.48, and its market value evaporated overnight by $30.4 billion, equivalent to approximately RMB 220 billion, with a total market value of approximately $523 billion. This number has reached a new low since the beginning of this year. Public data shows that Tesla's market value has evaporated by 35% since the beginning of this year. Meanwhile, as a comparison, traditional car manufacturers such as Toyota and General Motors saw their stock prices rise by 45% and about 20% respectively.

Industry insiders believe that the direct reason for Tesla's sharp decline this time is the impact of the company's layoffs.

Recently, Tesla CEO Musk released an internal letter stating that he will lay off 10% of employees worldwide. Musk stated that this was a difficult decision made after a thorough review of the company's organization. "There's nothing that I hate more than layoffs, but I have to do it."

According to relevant data, as of the end of 2023, Tesla had approximately 140500 employees worldwide. The 10% layoff rate means that more than 10000 employees will lose their jobs at Tesla.

Some comments suggest that according to Tesla's layoff history, layoffs are actually a normal operation for Tesla and are not worth excessive attention or interpretation. Some analysts also believe that this is a normal corporate strategic behavior. However, Michael Ashley Schulman, Chief Investment Officer of Running Point Capital Advisors, believes that the departure of core executives is a bigger negative signal that Tesla's growth is in trouble.

From the situation in recent years, Tesla's layoffs have not been fully recorded as follows: in 2017, there were 2% layoffs; In 2018, 9% of employees were laid off; In 2019, 7% of employees were laid off; In 2022, 3% of employees will be laid off; In 2024, 10% of employees will be laid off.

From the above situation, it may be seen that Tesla's layoffs are indeed a normal operation, but such intensity as this layoff is still rare in recent years.

Of particular note, on the same day Tesla announced its layoffs, at least two executives resigned. It is reported that Drew Baglio, senior vice president of powertrain and electrical engineering, and Arhat Patel, vice president of public policy and business development, left Tesla on Sunday.

Bagrino was one of Tesla's earliest employees. He worked closely with Tesla's co-founder and long-time Chief Technology Officer, Straubel, and became the company's de facto most senior engineering leader, responsible for batteries, motors, drive units, power electronics, and energy products, making him the core of Tesla's business. Even these executives who have been working for the company for about 18 years have resigned, which fully demonstrates that the situation and background of Tesla's layoffs are indeed not simple.

The direct reason for Tesla's series of problems is the significant decline in sales. Recently, during a live broadcast discussing Tesla's sales in the past two years, Musk mentioned that sales of pure electric vehicles are currently declining worldwide, leading to a lack of confidence in Tesla's stock market. He also stated that Tesla's stock has fallen by at least 30% so far.

Further investigation into the main reasons for the decline in sales, the author believes that there are several aspects as follows:

One is the lack of sincerity in product innovation, especially in the slow updating of aging car models. The latest model Model 3 was launched 7 years ago, and although there have been some facelifts since then, there have been no revolutionary changes.

The second reason is that the price remains relatively high compared to other brands, with a long-term high of over 250000 yuan, but the competitiveness of its products has not improved or remained within a range acceptable to the public, thus weakening consumer interest in its products.

The rise of competitors has brought a profound crisis to Tesla. Especially new energy vehicles from China are constantly launching more technological and cheaper models, squeezing Tesla's survival space.

Layoffs are a last resort, and any powerful company is actually a last resort. Tesla should fully recognize its own series of problems and make innovation and enhancing brand competitiveness the direction of its efforts. Simply relying on layoffs to reduce costs is not enough to make Tesla stand firm and regain its former glory.