More Than 3,000 Workers To Be Laid Off By Electric Carmaker Tesla

Neha Gupta

Employees of electric carmaker Tesla Inc (NASDAQ:TSLA) have been informed that around 9% of the company’s workforce will be laid off. This is the largest layoff in the history of Tesla and it comes as the car maker burns through cash with a view of meeting production goals for the Model 3 sedan. Around 3,600 employees are expected to be declared redundant out of a total workforce of 40,000.

According to the founder and chief executive officer of Tesla, Elon Musk, the staff cuts will not compromise the ability of the automaker with regards to meeting the company’s goals. No factory workers will be affected. Per Musk there has been a duplication of some job functions and roles and while this could have been justified in the past that is not the case presently. Tesla did not however reveal the amount of money that would be saved by the layoffs.

No annual profit

In the one and a half decades that Tesla has been in existence the electric car maker has not turned an annual profit and it is only in two quarters that it has registered a net profit. Tesla has focused on investing heavily in an extensive EV-charging network, manufacturing plants and technology. During an annual shareholder meeting which was held earlier in the month the CEO of Tesla indicated that the firm would post a profit for the July to September quarter.

This is not the first time that Tesla is laying off employees. Last fall Tesla sent home between 400 and 700 employees following annual performance reviews. A decade ago Tesla also declared a smaller number of employees redundant. According to Musk it would be impossible for the electric car maker to promote the adoption of cleaner energy across the globe if it couldn’t become sustainably profitable.

Flat management structure

The reorganization at Tesla was first telegraphed last month when Musk indicated that the management structure of the company would be flattened. Among the employees who are expected to be affected include those who are based at Home Depot and who are involved in Tesla’s solar business which came into being after the acquisition of SolarCity. Some of these workers will get a soft landing as they will be offered a chance to work in the retail business of Tesla.

According to an analyst at CFRA, Efraim Levy, the announcement of the impending layoffs at Tesla is a sign that the electric car maker is maturing and making profitability a priority.

“There is a normal ebb and flow of hiring and firing in a business. Nine percent is a big chunk to do at once, but there comes a time when a company grows up and they have to cut out the fat to become more efficient,” said Levy.

In the recent past Tesla has faced a lot of criticisms for failing to meet production targets despite revising the goals severally. At the moment the electric car maker has set a target of producing 5,000 Model 3 vehicles per week before this month ends. Some analysts are of the view that Tesla needs to raise additional capital before next year’s first quarter.

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