After a quarter of vehicle deliveries below expectations, Tesla is forced to take drastic measures to maintain its competitiveness. Tesla shares suffered a decline after the announcement that the company plans to carry out a significant cut in its workforce, exceeding 10% of its workforce globally, as part of a strategy to counteract the effects of weak deliveries in the first quarter and face increasingly intense competition in the electric vehicle market, Fox Business reported.
Tesla CEO Elon Musk, through a leaked internal email, explained that this measure seeks to optimize costs and increase productivity after years of accelerated growth that have led to the duplication of roles and functions in certain areas of the company. This decision would affect approximately 15,000 employees, taking into account that the company employs 140,473 people around the world.
NBC noted that this announcement comes in a context where the technology company experienced a decline in quarterly deliveries for the first time in almost four years, falling below the expectations of Wall Street analysts. The company reported the delivery of around 387,000 vehicles in the first quarter, representing a decrease of 8.5% compared to the same period last year.
Additionally, Tesla has been forced to cut prices in China, a key market for the electric vehicle (EV) maker, due to pressure from low-cost competitors such as BYD, eroding its profit margins. In addition to this, Reuters revealed that Tesla abandoned its plans to develop an affordable starter vehicle, supposedly called Model 2, which would have an initial cost of $25,000.
The electric vehicle sector is experiencing a slowdown in sales growth rate, particularly for Tesla, which now faces fiercer competition than ever. Chinese giant BYD has temporarily overtaken Tesla as the world‘s largest EV maker, and the entry of competitors such as Chinese smartphone company Xiaomi, which announced its first electric car at a significantly lower price than the Model 3 The company led by Musk, intensifies the fight for market share.
Tesla is facing an unprecedented restructuring in a bid to maintain its leadership in the electric vehicle industry. These challenges come on top of the logistical hurdles and supply chain disruptions Tesla has faced this year, which could result in significantly lower growth than previously recorded. The company has warned investors that vehicle volume growth this year could be significantly slower than the pace achieved in previous years.
Musk’s decision to reduce his staff not only reflects the immediate challenges facing the company, but also a renewed focus on operational efficiency and preparation for future waves of growth. This adjustment in its workforce is a difficult step, but according to the also owner of X, necessary for Tesla to remain agile, innovative and prepared for the next growth cycles.