Tesla announced a drastic cost-cutting plan: the electric car giant led by Elon Musk will fire more than 10% of its workforce worldwide, or approximately 14 thousand employees. The news caused the collapse title Tesla on the stock market, up almost 4% and over 30% since the beginning of the year, dropping to 530 billion dollars in capitalisation. This decline is attributable to a number of factors, including a decline in demand for electric cars on the market and increasingly fierce competition from Chinese manufacturers.
Tesla fires 14 thousand employees: here's why
In an email addressed to employees and reported by the Bloomberg agency, Musk explained the reasons behind this decision. On the one hand, a duplication of roles within the organization has been highlighted, while on the other there is an urgent need to cut costs to increase company productivity. This review process led to the difficult decision to reduce the workforce significantly. “There is nothing I hate more,” the entrepreneur said, but “it has to be done. This will allow us to be lean, innovative and hungry for the next growth cycle.” This isn't the first time Tesla has faced a workforce reduction situation. Last year, the company laid off 4% of its workers in New York as part of a performance review.
Furthermore, as part of this reorganization, another piece of news has emerged: the senior vice president Drew Baglino has left the company. Baglino, with 18 years of experience at Tesla, was responsible for the engineering and technological development of batteries, motors and energy products. His departure represents the second loss of a senior executive in just eight months, signaling a period of significant change within the company's leadership.
The decline of Tesla and the challenges of Chinese competition
The decline in global vehicle deliveries in the first quarter of this year was a wake-up call for Tesla, which saw a decline for the first time in nearly four years. The automaker sold 386.810 cars in the first quarter of the year, recording a decline of 20% compared to the previous quarter and 8% compared to the same period in 2023. Attempts to stimulate demand through price cuts they did not produce the desired results, while the company's outdated models struggled to compete in the market.
Competition, especially from China, has proven to be a significant challenge for Musk. At a time when high interest rates have curbed consumers' appetite for high-value purchases, Chinese rivals have launched more affordable and innovative models. Tesla, in turn, has had to deal with the cancellation of a long-overdue affordable car, a move it has disappointed investors who were counting on it to spur growth in the mass market.
