Tesla Faces Potential Layoffs Amid Market Challenges

A report today from Bloomberg is raising questions about whether Tesla might be headed for a round of layoffs. The news comes after a year of headlines about the American EV maker slashing prices, causing chaos in the secondhand EV market, and amidst fears of softening EV demand. The company’s 2023 fourth-quarter results were also weaker than analysts expected, showing just 3 percent growth in revenue and warning of lower vehicle volume in 2024. While the purported layoffs may or may not happen, the circumstances for layoffs at Tesla seem to be present.

Management’s Approach to Employment

Bloomberg reports that Tesla managers have been asked to apply a binary criterion to their employees: Are their jobs “critical” to Tesla? Elon Musk has often taken an “all or nothing” approach to his employees, demanding intense commitment from the remaining workers at X (formerly Twitter) and ultimately laying off between 80 and 90 percent of the total staff. Moreover, Tesla has increased headcount recently. Consequently, given the projected slowing in vehicle sales, along with continued low prices and soft demand, layoffs may be unavoidable.

Recent Challenges Faced by Tesla

It’s the latest in a swirl of negative news about Tesla recently. For instance, Hertz dumped 20,000 EVs, the majority of which were Teslas, after high repair and parts costs, along with declining value, made them a liability. However, it is important to note that this decision involved more nuances than merely suggesting that consumers do not want EVs. Furthermore, a Delaware court agreed with some shareholders that Musk’s latest compensation package was awarded under misleading terms, casting doubt on the CEO’s $55 billion payday.