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Tesla will shed more than 10 percent of its workforce

Tesla will shed more than 10 percent of its workforce

Tesla notified employees Monday that the company would slash more than 10 percent of its staff, the latest setback for one of the world’s top electric-vehicle makers, which is struggling to hold its place as a vanguard in the EV industry amid cooling demand, increasing scrutiny from regulators and controversy around its unpredictable chief executive, Elon Musk.

In a layoff notice obtained by The Washington Post, employees were told early Monday morning that Tesla, which has a large presence in California and Texas and factories in Germany and China, is cutting a significant number of jobs after a “thorough review of the organization.”

“Over the years, we have grown rapidly with multiple factories scaling around the globe,” according to the email, which was shared with The Post. “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 job cuts — which include more than 14,000 workers from a range of departments, including sales, engineering and policy — are a blow to a company considered a bellwether for the state of the EV market. The company disclosed earlier this month that sales had fallen faster than expected amid waning demand for EVs. As competition with foreign players, especially in China, has intensified, Tesla’s stock has taken a beating, shedding a third of its value already this year.

Musk, who bought X, formerly Twitter, by financing much of the purchase through Tesla stock, is now under pressure to show the carmaker is working to improve its bottom line and allay concerns that the company is losing its place as a pace-setting innovator and a darling of the tech industry. Earlier this month, Musk unveiled plans to launch a robotaxi sometime in August, but it’s unclear how the cuts will affect Musk’s ambitious timeline.

“If there were some massive rebound in the business, they wouldn’t be doing layoffs,” said Gene Munster, managing partner at Deepwater Asset Management, who added that a new phase of growth for the company probably will not start until 2025.

Tesla’s fortunes have taken a dive since Musk took over X in 2022, causing once-enthusiastic investors to reevaluate their relationship with the company. He has alienated potential buyers with his inflammatory rhetoric and found himself in the unusual position of seeking greater control against a backdrop of muted support.

Tesla couldn’t immediately be reached for further comment.

In a separate letter to employees, Musk told his staff that the layoff would affect more than 10 percent of the company’s workforce.

“We are developing some of the most revolutionary technologies in auto, energy and artificial intelligence,” Musk said in the note, published by CNBC. “As we prepare the company for the next phase of growth, your resolve will make a huge difference in getting us there.”

In its layoff notice, Tesla said that “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.” It added, “As part of this effort, we have done a thorough review of the organization, and made the difficult decision to reduce our head count globally.”

Workers were told Monday was their last working day and their access to Tesla’s systems and locations was being cut off immediately. They were told they would receive information on severance packages and benefits within 48 hours.

One laid-off worker, speaking on the condition of anonymity to discuss a sensitive matter, said the news of job cuts came as a shock at his location, where multiple employees lost their jobs.

Analysts said the deep job cuts announced Monday indicate any recovery is at least a year away, with the company in cost-cutting mode.

“They’re clearly adjusting the business for this remarkable slowdown in demand,” Munster said. Customers should also expect longer lead times, as Musk may be “over-cutting,” he said.

While sales of electric vehicles are still growing faster than gasoline car sales in the United States, interest has started to cool amid concerns about a lack of charging infrastructure, among other reasons. Other automakers, including General Motors, Ford and Mercedes-Benz, have delayed electrification goals or reduced their short-term ambitions of electrification. At the same time, though, big EV producers in China, including BYD, have also ramped up exports, challenging Tesla and other Western automakers for global market share.

Tesla reported earlier this month that its deliveries tumbled to 387,000 in the first quarter, a 20 percent falloff from the previous quarter and an 8 percent drop year over year. The company blamed the slowdown, at least in part, on a shift to early production of the next version of its Model 3 sedan, Red Sea shipping disruptions and suspected arson at its factory near Berlin.

Musk said earlier this year that Tesla was “between two major growth waves” as it pivoted resources toward the production of its next vehicle, known as the Model 2. But Reuters reported this month that the company has scrapped plans for that car, stoking concerns about future prospects.

Musk recently doubled down on his Full Self-Driving technology — Tesla’s most sophisticated driver-assistance system — by requiring employees to install and show customers how to use the latest version before completing a sale.

Monday’s announcement also coincides with the departure of Drew Baglino, Tesla’s senior vice president for powertrain and energy, who on Monday announced on X that he had made the “difficult decision” to leave Tesla after working there for 18 years. Musk replied that “few have contributed as much” at Tesla as Baglino.

Rohan Patel, a former Obama administration official who led policy and business development at Tesla for eight years, also announced his resignation Monday, which also prompted thanks on X from Musk.

Amid the internal turmoil, Tesla is also facing increased scrutiny from regulators over its driver-assistance software Autopilot. Last year, the company agreed to recall about 2 million vehicles — nearly every car it has produced — over concerns that the technology did not have enough guardrails to prevent driver misuse. The recall was the result of a sweeping investigation by the National Highway Traffic Safety Administration.

The company’s Autopilot technology has been linked to more than 700 crashes since 2019 and at least 19 fatalities, according to a Post analysis of NHTSA data.

Tesla’s legal position is that it repeatedly and explicitly warns drivers that they are ultimately in control of the vehicle, must be fully alert and have hands on the wheel while using Autopilot. But last week, court documents show, it agreed to settle a lawsuit stemming from the 2018 death of a former Apple engineer whose vehicle veered off a California highway. The case is among several alleging that Autopilot contributed to a fatal crash. In the fall, the company was deemed not liable in a lawsuit involving the technology and a 2019 crash in Riverside County, Calif. Two other cases are heading to trial.

Meanwhile, a survey by the market intelligence firm Caliber, provided to Reuters, showed that Tesla’s “consideration score” was down to 31 percent in February. That compares with the 70 percent recorded in November 2021, when it started tracking consumer interest in the brand. The report said Musk’s reputation was partly to blame; he has courted controversy in the past year with polarizing comments that have driven users and advertisers away from X.

Jeanne Whalen contributed to this report.