Updated Apr 15, 2024 - Business

Tesla cutting 10% of workforce as sales disappoint

White electric vehicles sit in a single file row

Tesla Model 3 sedans wait to be shipped aboard at Shanghai Haitong International Automotive Terminal on March 14 in Shanghai, China. Photo: VCG/VCG via Getty Images

Tesla is cutting 10% of its workforce — and multiple executives are departing — as the company grapples with middling electric vehicle sales.

Why it matters: Tesla is the world's largest maker of premium EVs, but the company recently reported its lowest quarterly sales since 2022.

  • Tesla did not immediately respond to Axios' request for comment on Monday morning.
  • The company had about 140,000 employees as of January, according to a public filing.

Driving the news: CEO Elon Musk told employees in an email that the move stemmed from a need to cut costs and bolster productivity.

  • "There is nothing I hate more, but it must be done," Musk said in the email. "This will enable us to be lean, innovative and hungry for the next growth phase cycle."
  • Drew Baglino, Tesla's SVP of powertrain and energy, and public policy exec Rohan Patel both said on X that they're also leaving.

Context: The automaker delivered 386,810 vehicles worldwide in the first quarter, down 8.5% from the same period a year earlier.

  • Analysts had expected deliveries of 443,000, according to Evercore ISI's Chris McNally.
  • Deliveries are a close approximation of sales.

Between the lines: The cuts reflect Tesla's pivot to shoring up profits while it aims for a sales turnaround.

  • "Tesla has historically adjusted its workforce based on its strategy, hiring during periods of growth and reducing headcount during slowdowns," Morningstar equity strategist Seth Goldstein wrote Monday.

The problem is that Tesla doesn't have much hope for significant revenue growth until it delivers a next-generation vehicle — dubbed the Model 2 — or robotaxis.

  • EV sales have hit what Barclays analyst Dan Levy recently called an "EV winter," with startups ailing and overall sales plateauing.
  • Reuters recently reported that the Model 2 has been canceled, though Musk denied that.
  • Shortly after that report, he said the company would debut a robotaxi on Aug. 8, but it could be years before it contributes to the bottom line.

What to watch for: Tesla reports earnings on April 23.

  • "We need to hear the rationale for the cost cutting, the strategy going forward, product roadmap, and an overall vision from Musk" Wedbush Securities analyst Dan Ives wrote today, "otherwise many investors might head for the elevators during this Category 5 perfect storm of weak demand Tesla is seeing globally in 2024."
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