The well-known electric vehicle manufacturer Tesla plans to eliminate at least 14,000 jobs worldwide, or more than 10% of its current staff. The corporation made this decision in reaction to pricing challenges and weak demand at the moment. The CEO of Tesla, Elon Musk, announced this information in a memo, stressing the need to streamline processes in order to improve productivity and creativity.
Due to the company’s recent rapid expansion, responsibilities and functions have become redundant in some sectors, which is what caused Musk to make this “difficult decision.” While voicing his disapproval of such measures, he emphasized how crucial they are to keeping Tesla competitive and adaptable during its upcoming growth stage.
Tesla’s challenges in 2024, according to reports, have emerged since its start as the company made deliveries of about 387,000 units during Q1, falling short of market forecasts by about 13%. The contraction is the first time in almost four years and can be traced to several causes, among them production issues arising from disruptions including an attack on shipping off the Red Sea and an arson attack in the Berlin facility. In addition to that, there has been a softening global demand leading Tesla to make the difficult decision of workforce downsizing.
Despite the backlash over his approach to leadership, Musk continues to be optimistic about Tesla’s future. He believes that the decline in sales is not connected with his personality but is a result of unfavorable market tendencies. Although Ross Gerber, CEO at Gerber Kawasaki, thinks otherwise, stating that job cuts show real damage to the brand’s cost due to Tesla’s poor performance in the declining sales market even during robust economic times.
In addition to addressing these issues, Tesla is concentrating on boosting its profit margins, which have been negatively impacted by regular price reductions, especially in the cutthroat Chinese market. In the fourth quarter, the company’s gross profit margin dropped to 17.6%, the lowest level in more than four years.
Tesla’s shares fell 5.6% after the news, indicating that the market has not been kind to the company as it attempts to overcome these obstacles and realign itself for development. Due to these issues and other factors, Tesla’s market value has significantly decreased in 2024. Tesla is dedicated to its goal of hastening the global switch to renewable energy in spite of these challenges.