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Tesla faces layoffs and share slump

Tesla shares slumped on Monday after online news services reported that the EV giant was about to cut its worldwide job numbers by 10%.

With over 14,000 people employed worldwide, the cut would be a massive 14,000 or more.

The company has also frozen all new hires, which helped send the shares down more than 5% in a weak overall market.

Business Insider and other websites revealed the planned cuts on Monday morning (US time), according to an internal memo sent by Elon Musk on Sunday, which was seen by Business Insider.

The layoffs come shortly after the carmaker posted lackluster delivery numbers, especially from its US car plants.

The company is due to reveal its March quarter figures shortly, probably on April 23. Some analysts are now saying the job cuts are a big signal that the company made a tiny profit or a loss in the quarter.

Musk wrote in the email, “There is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth cycle.”

“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 obtained by CNBC.

“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” the memo said.

Tesla deliveries in the first quarter fell 20% from the previous quarter and over 8% from the same time the previous year, marking the company’s first year-on-year sales decline since 2020. The company was left with a stockpile of over 46,000 unsold vehicles at the end of the quarter.

Tesla has spent the final months of 2023 and all of this year so far engaging in frenetic price wars in the US, China, and several other markets.

These have seen prices and service costs slashed, then partially restored, then cut again to the point buyer hesitation is being reported because they are uncertain about the buying price and if their purchase will lose value in any more price cuts.

Last year, Tesla sacked dozens of its employees working on its Autopilot service at one of its sites in Buffalo, New York. That is now the service that Musk is promoting to be the company’s next growth project instead of the cheap Tesla 2 idea.

Musk last week cut the Autopilot’s cost in half to $US99 a month in an effort to make it attractive. That’s despite it doesn’t Autopilot a car without human oversight.

At the time, the company said the terminations had nothing to do with a union campaign at the facility that had been announced the week before. The company said it dismissed the employees for poor performance.

Some analysts reckon the sackings will be concentrated in the US where it is easier to get rid of staff than it is in China at its huge Shanghai factory that is the company’s biggest and most profitable business.

It is also very hard to sack staff in Germany where Tesla and Musk have been struggling to start up a big new factory near Berlin.

Trump also sacked half of Twitter’s staff after buying the platform for $US44 billion.