Tesla has recently made a headline for laying off a significant number of employees which has ultimately impacted the wealth of both employees and the company. The workforce reduction will also affect Tesla’s operational capabilities. However, the EV giant has taken this move following its comprehensive strategy to grow further and at a rapid pace. While some potential drawbacks are there, organizers are optimistic about pocketing incredible advantages in the coming years.
Reasons of Layoff
Although the world’s largest Electric Vehicle manufacturer has revolutionized the transportation industry with its incredible electric cars, energy storage devices, and solar products. Nevertheless, several financial challenges are there, resulting in such a difficult step adopted by the company.
This poor financial performance caused the profit margin of Tesla to get narrower and narrower. Additionally, an extended debate on the price of electric vehicles has put more pressure on Tesla to make them competitive. While EV sales have touched a record level in 2023, the profit is far less than expected because of the reduced prices of its products.
The Layoff
The management of Tesla informed the employees regarding the layoff decision on Monday, as reported by TechCrunch. Not only the new workers but also the high-performing individuals have to lose their positions in the current layoff round. Some departments have faced employee reductions of up to 20% which will ultimately impact their performance and functioning. Tesla announced the layoff just a week before the revelation of its first-quarter earnings report of 2024.
Most of the laid-off workers were top performers of Tesla. The eventual chopping block for such individuals has impacted their self-esteem as well as put adverse effects on the ongoing projects. However, Tesla is being highly vigilant during the whole procedure as all of those projects are down on the priority list. While the details are still not revealed officially, the loss of skilled labor will significantly reduce the functional tendency of the company. On average, a total of 10% workforce has been laid off.
Impacts of Layoff
Soon after Tesla announced the layoff decision, Popular company executives including the likes of Rohan Patel, who was performing his duties as the VP of Public Policy and Business Development, and Drew Baglino, the SVP of Powertrain and Energy, left the company. Patel has said that the current financial challenges and the layoff decision are the reasons for his decision. These departures are expected to bring down Tesla’s reputation in the market.
Future Prospects
Despite the setbacks, Elon Musk, the current CEO of Tesla, is excited to enable the company to develop self-driving cars. Also, he has announced the decision not to create a low-cost EV, which was expected to be priced at $25,000. Moreover, the company is leveraging the potential of an existing platform for its upcoming product which will be on August 8.
