Tesla (NASDAQ:TSLA) is reportedly laying off 10% of its staff, about 14,000 workers, as it grapples with slowing sales.
It’s the first layoff for the car division. Workers at its Buffalo solar panel plant got laid off in 2023.
In a brief memo to staff, Musk blamed “duplication of roles and job functions in certain areas” for the decision. He wrote the Tesla layoffs would “prepare the company for our next phase of growth.”
TSLA stock fell 2% on April 12 and another 0.5% over the weekend. The stock is expected to open this morning at $171/share, a market capitalization of about $540 billion.
A Long Way to Fall
The layoffs were not unexpected. Tesla sales were down for the first quarter, and it has backed off promises of a $25,000 car. The stock is down 27% in 2024.
Tesla may have much further to fall. It’s still worth over 10 times more than General Motors (NYSE:GM) or Ford Motor (NYSE:F), both of which are larger.
I have blamed the CyberTruck, which distracted management from the need for lower-priced cars. Now BYD (OTCMKTS:BYDDF) and other Chinese names are delivering electric vehicles for $25,000 and less, with which Tesla can’t compete. CyberTruck deliveries were recently halted to deal with an accelerator problem.
Tesla has acted just like Detroit’s automakers, which now depend for their profits on huge gas-powered trucks like the F-150. The electric versions of such trucks wind up being too heavy and expensive to compete. Why, then, is it worth 10 times more?
Tesla bulls have pointed to other company operations for optimism. There is subscription revenue for its Full Self-Driving service. Its charging network remains successful. But 90% of revenue still comes from car sales.
Tesla Layoffs: The Bottom Line
Tesla bears have seen this coming from a long way off. The question is whether the bulls will take their blinders off.
On the date of publication, Dana Blankenhorn did not hold (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.
