Tesla will lay off more than 10% of global workforce: Read the Elon Musk memo

Teslawill lay off more than 10% of its global workforce، according to a memo sent to employees by CEO Elon Musk.

Shares were down about.5% in premarket trading Monday.

“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.

Teslahad 140،473 employees as of December 2023.

The memo was first reported bytech publication Electrek.

Taking a bruising

Tesla shares have taken a bruising in recent months، down 31% year-to-date amid waning demand for electric vehicles and stiffening competition from Chinese automakers، which benefit from Beijing subsidies. One of these rivals، BYD، last year wrested Tesla’s mantle to become the world’s largest seller of EVs — and Musk has previously recognized that China، which is home to a large Tesla plant، may also house the company’s strongest competition.

“There’s a lot of people who are out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong،” Musk said in November.

The U.S. company earlier this month reported its first annual decline in vehicle deliveries since 2020، when the Covid-19 pandemic disrupted production extraneous of demand — first-quarter deliveriesfell by 8.5%on the year to 386،810 in the first quarter، with output down 1.7% from a year earlier and 12.5% sequentially.

Since then، the firm has also resorted to trimming the subscription price of its premium driver assistance system، the Full Self-Driving package، for U.S. customers — in a move sharply at odds with Musk’s previous pledges that the FSD fee would only bulk up as Tesla bolsters the system’s features and functionality.

But the squeeze on the company’s operating margin —which came in at 8.2% in the fourth quarter، down from the 16% for last year — remains، and Tesla has warned investors to brace that vehicle volume growth this year “may be notably lower” than the rate logged in 2023، noting it is “currently between two major growth waves.”

Logistical challenges exacerbated Tesla’s problems this year. The company’s component supply was a casualty of disruptions caused by Yemeni Houthi maritime attacks in the Red Sea، while the automaker’s gigafactory near Berlin، Germany، was forced to briefly suspend production due to a suspected arson at a nearby electricity substation.

Tesla will post its first-quarter financial results onTuesday، April 23.