Tesla (NASDAQ:TSLA) has proven that it isn’t done reducing its workforce. The electric vehicle (EV) leader has laid off another 200 employees, most of whom worked on its autopilot technology. This isn’t the first group of layoffs since Elon Musk announced that a 10% workforce reduction. TSLA stock managed to rally earlier this month when previously laid off workers filed a lawsuit against they hadn’t been given proper notice. But today’s news has sent shares back down into the red as investors and experts raise questions.
TSLA stock hasn’t been falling just today either, its performance has been turbulent recently. While that isn’t unique for the company, it’s hard to ignore the bigger picture. Tesla has announced multiple layoffs in just the month of June. While Musk ultimately attempted to walk back the claim, Tesla has moved ahead with the layoffs. It’s rare that workforce reductions boost a stock but not unheard of. However, Tesla is also battling other market forces right now. The combination of layoffs, bearish price targets and grim statements from Musk have made it hard for TSLA stock to rally.
Let’s take an in-depth look at why these layoffs are coming at a bad time for Tesla.
Layoffs Mean Bad News for TSLA Stock
This week’s layoffs primarily concerned workers from Tesla’s office in San Mateo California which will be closing. TechCrunch reports that most of them were part of the autopilot team, working on the driver-assistance feature. As the outlet notes:
The cuts come amid a broader reduction of jobs at Tesla. However, these layoffs targeted personnel once deemed critical to the company’s Autopilot advanced driver assistance system and more notably efforts by CEO Elon Musk to further develop automated driving functions through the $12,000 optional FSD system.
At first glance, this might seem like good news. Tesla is clearly focused on saving on costs by outsourcing jobs. However, there is an important flip side that investors shouldn’t ignore. Tesla’s autopilot technology has drawn considerable controversy throughout 2022 alone, leading to several accidents that left people dead and multiple recalls.
Tesla’s full self-driving (FSD) tech has tremendous potential but recent events have proven that it needs more time. And as TechCrunch highlighted, the people being laid off were a key part part Musk’s original vision. Now more than ever, Tesla should be investing in the development that it needs to bring its FSD tech to market. Doing so could help boost TSLA stock at a time when it needs a growth catalyst.
The Road Ahead
These layoffs may signal to investors that Tesla is either no longer concerned with a promising market. Alternatively, they may assume that its need for money has put it on the back burner. Musk’s recent comments about Tesla factories being “money furnaces” doesn’t do much to inspire investor confidence and the recent price target reductions aren’t either either. Even with its stock split looming, Tesla still needs a new catalyst to signal a turnaround.
While it’s possible that these layoffs may end up boosting TSLA stock in the long run, much remains to be seen. Tesla has generated plenty of headlines involving layoffs lately and that isn’t what investors want to see.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
