Tesla has experienced a major shakeup recently, with layoffs impacting some of the company’s top performers and resulting in cuts to several departments. Sources familiar with the matter have revealed that some departments were slashed by as much as 20%.
The news of the layoffs was delivered to employees on Monday, just a week ahead of Tesla’s scheduled earnings report for the first quarter. A source has disclosed to TechCrunch that poor financial performance was cited as the primary reason for the cuts.
The EV price war, which has raged for over a year, has taken a toll on Tesla’s profit margin. Despite record-breaking vehicle deliveries of 1.81 million in 2023, margins have declined due to repeated price reductions in an effort to increase sales and compete with other companies.
An internal email from CEO Elon Musk, viewed by TechCrunch, stated that the layoffs were necessary to reduce costs and increase productivity as the company prepares for its next phase of growth. The cuts will affect over 10% of Tesla’s global workforce, which includes operations in the United States, Europe, and China.
Interestingly, these layoffs have not spared high performers within the company. Two sources, who wished to remain anonymous, have disclosed that many talented employees were affected by the cuts. One source expressed shock at the number of valuable employees who were let go, many of whom were working on projects that were no longer a priority for Tesla.
Some departments have experienced layoffs that go beyond the initially stated 10%. According to a manager, 20% of their team was affected by the cuts. “I lost 20% of my team, some really good players too,” they revealed.
The restructuring at Tesla coincides with Elon Musk’s ongoing efforts to steer the company towards the development of fully self-driving cars. In recent weeks, Tesla has scrapped plans for a lower-priced electric vehicle and instead shifted its focus towards building a self-driving “robotaxi” that is set to debut on August 8.
Musk had previously attempted to prioritize the development of a dedicated robotaxi vehicle, in line with his desire for Tesla to become a leader in artificial intelligence and robotics. However, last week it was reported that Musk changed his mind, opting to focus on the development of both the robotaxi and the lower-priced EV.
The shakeup at Tesla has also resulted in the departure of two high-profile executives. Drew Baglino, Tesla’s Senior Vice President of Powertrain and Energy, and Rohan Patel, VP of Public Policy and Business Development, have left the company.
Patel informed TechCrunch that he made the decision to leave Tesla due to “big overall changes” within the company. While he did not provide specifics, Patel had recently been engaging with Tesla customers and fans on social media. In a message, he stated that he believes “Tesla is going to be stronger than ever” and that change can be a positive thing.
Baglino, who had been with Tesla for 18 years, also shared his reasons for leaving with TechCrunch. “I feel good about the impact I’ve been able to achieve,” he wrote, “but it’s time for me to move on.” Speculation has arisen that Baglino’s departure may be linked to a lack of sustainable innovation within the company.
These exits follow closely behind the departure of Tesla’s former CFO, Zachary Kirkhorn, in January. In a post on social media, Musk expressed his desire to have a 25% voting control of the company in order to focus on Tesla’s growth and advance its developments in AI and robotics.
This article has been updated to include information from a regulatory filing, which refers to the layoffs as a “restructuring.”
