Tesla Layoff Proportion Revealed, Q1 Financial Report to be Released this Tuesday

　　Overall, European car sales data for March showed a decline, with electric car demand particularly weak, and pure electric car sales down by 11%, putting tremendous pressure on car manufacturers. As a major American electric car manufacturer, Tesla is facing such a severe market environment and has to take measures to cope.

Tesla Global Workforce Reduction

　　According to a report by the foreign technology website Electrek, Musk pointed out in an email to employees that the reason for the layoffs is to reduce redundant functions between departments and lower costs. Musk believes that this is necessary preparation for the company to smoothly enter the next growth phase. He emphasized the importance of examining all aspects of the company to reduce costs and improve production efficiency.

　　In the email, Musk also mentioned that they have conducted a comprehensive review of the company's organization and made the decision to lay off more than 10% of the employees. Although this is one of the things he least wants to do, it is necessary.

　　According to reports, Tesla had 144,730 employees at the end of last year, and if calculated at a rate of 10%, it is expected that more than 14,000 employees will be laid off. The layoff plans for each region will vary according to regional differences.

　　Since Tesla announced a 10% workforce reduction globally, specific layoff plans have been implemented in multiple offices and factories.

　　According to media reports citing informed sources, the layoff rate of Tesla in China is around 20%, higher than Musk's stated 10%, and even certain departments such as the sales department may have a layoff rate of up to 50%.

　　Tesla stated in a statutory notice that it will lay off 285 people in Buffalo, New York, for economic reasons, accounting for 14% of the total number of local employees. The local factory is responsible for producing solar roof tiles and fast-charging equipment. In addition, some employees are marking data for Tesla's Autopilot autonomous driving assistance system. It is worth noting that this area will also be the location of Tesla's Dojo supercomputer project.

　　In addition, Tesla also plans layoffs at factories in Germany and the United States. Germany is expected to lay off 300 temporary workers from April 22, accounting for 2.4% of the local workforce. Layoffs in the United States cover positions such as front-line employees, sales personnel, and engineers, and layoffs are ongoing.

　　Image source: wallstreet

　　Furthermore, it is reported that this large-scale layoff will also involve the Shanghai Gigafactory, and some employees of the factory have already received official emails. Since the official production launch in 2019, Tesla's Shanghai Gigafactory has accelerated the localization process of vehicle design, engineering research and development, and intelligent networking applications, cultivating a large number of technical and managerial talents for China's new energy vehicle industry. From production operation to research and development innovation, 99.9% of the employees of Tesla's Shanghai Gigafactory are Chinese.

　　Today, Tesla announced the first energy storage Gigafactory outside the United States—the Shanghai Energy Storage Gigafactory will start construction in May 2024 and is expected to be in mass production in the first quarter of 2025. The Shanghai Energy Storage Gigafactory will plan to produce Tesla's super-large commercial energy storage battery Megapack, with an initial planned annual production of 10,000 units and an energy storage scale of nearly 40 GWh, covering global markets.

　　The stock price of Tesla after the layoff is not optimistic. Since Tesla announced the layoff news, Tesla's stock price has fallen by more than 10% in two trading days, evaporating a market value of $45 billion. Tesla's stock price has fallen by more than 40% so far this year.

　　Image source: wallstreet

Behind Tesla's Layoffs

　　According to Bloomberg, a source familiar with the internal situation of Tesla's layoffs revealed that the main motive behind Tesla's layoffs is not to streamline personnel structure or reduce expenses, but to allocate resources to the RoboTaxi project. The source pointed out that all departments of Tesla were asked to achieve the specified number of layoffs in the company's overall layoff plan.

　　For more than a decade, Musk has been talking about plans for autonomous driving and persuading customers to pay thousands of dollars for Tesla's Full Self-Driving (FSD) product. Musk and Tesla's top engineers are particularly optimistic about the significant changes in the current working mode of FSD.

　　The idea of developing autonomous driving taxis (RoboTaxi) has been brewing within Tesla for at least eight years, but Tesla has not yet established most of the infrastructure required and has not obtained regulatory approval to test such vehicles on public roads. For this reason, Musk postponed the plan for the affordable Tesla Model 2. Earlier, Tesla announced the development of an entry-level Model 2 priced at $25,000 to boost sales.

　　This move has attracted significant attention, and many analysts and investors have turned their attention to the Model 2, and some analysts even regard Tesla's entry-level car as a ticket to profit growth and an effective solution to weak sales.

　　However, Reuters reported that two unnamed Tesla executives revealed that Tesla has decided to abandon the Model 2 and instead focus on the development of autonomous driving taxis (RoboTaxi), which has sparked another wave of investor concerns. Many investors and some insiders oppose this move, believing that this affordable car is crucial for Tesla's future.

Tesla Q1 Financial Report

　　This week, Tesla will release its first-quarter financial report ending March 31, 2024, marking the beginning of the tech giant's earnings season.

　　According to data from media think tanks, the profits of the “Seven Sisters” companies, including Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla, are expected to increase by 38% in the first quarter. Excluding these seven companies, the profits of other companies in the S&P 500 index are expected to decrease by 3.9%.

　　Barclays analyst Dan Levy predicts that Tesla's first-quarter financial report will show negative free cash flow for the first time since 2020, and the gross margin excluding regulatory credits may decrease to 14.6%, a decrease of 2.6 percentage points from the previous quarter—indicating that Tesla's automotive profitability will return to the level after the launch of the Model 3 in 2017.

　　In terms of deliveries, Levy predicts that Tesla's delivery volume will remain flat, mainly because Tesla still faces inventory backlog issues: there were about 100,000 unsold cars at the beginning of the year, and the inventory increased by 45,000 to 50,000 cars in the first quarter.

　　Of course, everything has two sides, and some investment institutions believe that Tesla's cost reduction measures during an economic slowdown will have a positive impact. Focus will be on Tesla's financial report this Tuesday, which may provide more information for interpreting recent layoffs and the company's demand trends.