Tesla is cutting 10% of its global headcount to reduce costs and streamline the company for its next phase of growth.
In a memo to employees, Tesla CEO Elon Musk explained that the layoffs were due to the company’s rapid growth over the years, which had inadvertently created duplicate roles and job functions in certain areas.
Despite Tesla’s standing as one of the leading electric vehicle brands in the world, Musk said it was imperative to re-examine the company every five years to look for potential cost savings or areas that can benefit from increased productivity.
As part of this effort, Musk said the company conducted a thorough review of the organization and decided to reduce its headcount by more than 10% globally.
“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 phase cycle,” the memo read.
In total, the layoffs will impact about 14,000 of the company’s more than 140,000 workers globally. Drew Baglino, head of Tesla’s battery division, and Rohan Patel, vice president for public policy, are among the top executives leaving the company.
“I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission, and we wish you well in your future opportunities,” said Musk.
Although Tesla is attributing the layoffs to a necessary reorganization within the company, JPMorgan analyst Ryan Brinkman said he believes that softening consumer demand for electric vehicles was really to blame.
Brinkman argued that the latest layoffs firmly dispel the notion that Tesla’s Q1 delivery miss reflected a problem with supply rather than demand.
In response to the layoff news, JPMorgan lowered its price target on Tesla (NASDAQ: TSLA) to $115 from the current market price of $155. Analysts expect Tesla’s share price to drop 26% over the next quarter.
