According to an insider who spoke with TechCrunch, Tesla management informed staff members on Monday that the company’s recent 20% departmental cutbacks, which included strong performers, were mostly the result of the company’s dismal financial performance.
Staff members were only informed of the layoffs one week prior to Tesla’s first-quarter earnings report. Due to an EV price war that has lasted for at least a year, Tesla has suffered a narrowing of its profit margin over the last few quarters. In 2023, the business delivered a record 1.81 million cars. But as Tesla frequently dropped prices in an effort to boost sales and undercut the competition, its margins suffered.
Over 10% of Tesla’s workforce, or roughly 14,000 individuals, will be let go, the multinational company with operations in China, Europe, and the US has notified its staff. Tesla described the layoffs as a “company-wide restructuring” in a regulatory filing. According to an internal email from CEO Elon Musk that TechCrunch has seen, the layoffs, which affected workers in all departments and seniority levels, were implemented to save expenses and boost efficiency in order to get ready for the company’s “next phase of growth.”
Top performers also make cuts
A number of the dismissed workers were top performers, according to two unnamed sources who talked to TechCrunch. A source conveyed surprise at the sheer quantity of skilled workers let go, pointing out that many of them were engaged in projects that had dropped down Tesla’s list of priorities. The source refused to say which projects were involved.
Sources claim that some divisions experienced layoffs over the 10% indicated in the company-wide email. A manager revealed to TechCrunch that they had laid off 20% of their staff.
“I lost some really good players and about 20 percent of my team,” they declared.
Additionally, the reorganisation occurs as Musk keeps bending the company’s course towards producing completely autonomous vehicles. Tesla recently abandoned plans to produce a less expensive electric vehicle (EV) with a starting price of about $25,000. Instead, the company decided to use the underlying platform being developed to power a robotaxi, which Musk claims will make its debut on August 8.
As per Walter Isaacson, Musk’s biographer, the devoted robotaxi vehicle project was earlier attempted to be prioritised. He declared to staff members in 2022 that he desired a “clean robotaxi” devoid of pedals and a steering wheel. Prior to last week’s reports that Musk had changed his mind, head designer Franz von Holzhausen of Tesla and engineering vice president Lars Moravy continued to oversee the low-cost EV project in secret and eventually persuaded him to produce both.
Leading executives depart
Additionally, the company lost two prominent executives: Rohan Patel, vice president of public policy and business development, and Drew Baglino, senior vice president of powertrain and energy at Tesla.
Patel informed TechCrunch that he made the decision to quit Tesla on Sunday night in light of “[b]ig overall changes” at the business. Patel declined to be more precise. In recent months, he has been interacting often on X with fans and customers of Tesla. It would be “better for me not to speculate,” he wrote in a message. Change is wonderful, and Tesla will be stronger than ever,” he continued.
After eighteen years, Baglino told TechCrunch it was time to quit Tesla. He sent a statement to TechCrunch saying, “I feel good about the impact I’ve been able to achieve, my leadership team is strong, the energy businesses I’m responsible for are doing well, etc.”
In an interview with TechCrunch, Sandeep Rao, head of research at Leverage Shares, a financial services company based in London, hypothesized that Baglino’s departure was likely due to the lack of sustainable innovation at this time. Powerdrives and new battery projects fell under Baglino’s purview.
Baglino’s exit from tsla occurs not too long after Zachary Kirkhorn, the company’s former CFO, resigned. In order to devote more of his attention to Tesla and help the electric vehicle manufacturer become a leader in artificial intelligence and robotics, Musk stated on X, the platform that once housed Twitter, in January that he would like to hold about 25% of the company’s voting power.
The information from a regulatory filing that describes the layoffs as a “restructuring” has been added to this article.