Tesla Inc (NASDAQ:TSLA) has told staff that around one in 10 will be laid off as the electric car maker cuts costs in the face of fierce competition and ends its plans for the cheaper 'Model 2' project.
Shares in the company fell 3.6% to below $165 on Monday, with news also emerging that the company was also slashing the price of its full self-driving software subscription.
Boss Elon Musk told employees in a memo that the board had carried out a “thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally".
He said axing these jobs "will enable us to be lean, innovative and hungry for the next growth phase cycle".
The memo, which has been seen by various agencies and newspapers, did not say how many jobs losses there would be, but Tesla had a total of 140,473 employees at the end of last year, according to its annual report.
"As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity," Musk said in the memo.
Many of those laid off were involved in the development of the scrapped Model 2 project, which industry website Electrek reported has now been completely defunded, despite denials by Musk of a recent Reuters report.
Instead of housing the Model 2 project, the expansion of Gigafactory Texas is now due to house a data center for the Robotaxi, which Musk recently tweeted is scheduled to be unveiled on August 8.
As well, long-standing senior executives also resigned.
Andrew Baglino, who has been at the company for 18 years, including as SVP of powertrain and energy engineering for the past four years, and Rohan Patel, VP for public policy and business development, both confirmed their departures in tweets posted on X.
I made the difficult decision to move on from Tesla after 18 years yesterday. I am so thankful to have worked with and learned from the countless incredibly talented people at Tesla over the years.
I loved tackling nearly ???? every problem we solved as a team and feel gratified…
— Drew Baglino (@baglino) April 15, 2024
At the start of the month Tesla shares dropped sharply after delivery numbers came in short of expectations, with lower first-quarter sales for the first time in four years.
The US EV group has been facing strong pressure from Chinese electric vehicle makers and a wider slowdown in demand. While it is on track to remain the world’s largest EV brand in 2024, deliveries are expected to be flat.