Tesla Announces Massive Round of Layoffs, Cybertruck Production Likely Impacted

Tesla reported disappointing Q1 2024 production and delivery numbers on April 2, shocking analysts and investors. While the carmaker offered several explanations for the production drop, it couldn't explain why deliveries were so bad. During the quarter, Tesla added more than 46,000 vehicles to its inventory, reaching an all-time high. People expect the financial data planned for release on April 23 to be just as bad. The worst part is that Tesla doesn't yet see a solution to its demand problem.

This was made clear after rumors about massive layoffs started surfacing last week. The rumors claimed that Tesla intended to lay off as much as 20% of its workforce. The number turned out somehow lower, although we don't yet know by how much. On Monday, an internal memo signed by Elon Musk announced that "more than 10%" of Tesla's global workforce will get their last paycheck.

Although Tesla regularly lays off workers, this is the highest number yet, potentially affecting over 15,000 employees worldwide. Tesla laid off 2% of its global headcount in 2017, 9% in 2018, 7% in 2019 and about 3% in 2022. Usually, the company frames the layoffs as a necessary step to keep the organization more efficient by trimming the unnecessary fat. However, this round of layoffs appears to be different, as it comes after a disappointing first quarter.

Earlier this year, Bloomberg reported that Tesla started reviewing its employee performance. Managers were instructed to identify key members of their teams, hinting at potential layoffs. At the same time, people complained that their performance reviews were delayed. Before the layoffs were announced, Tesla slowed production at several factories, including Giga Shanghai, its most efficient production facility.

Although layoffs are not unusual in the corporate world, there is more going on than just business as usual. One of the most surprising moves Tesla made recently was shortening the Cybertruck production shifts at Giga Texas. The Cybertruck was supposed to be production-constrained, with a difficult ramp-up that made it impossible to satisfy the huge demand. However, Tesla notified employees working on the Cybertruck production lines that their shifts would be reduced.

Normally, Cybertruck workers clocked 12-hour shifts from 6 AM to 6 PM and 6 PM to 6 AM. An internal memo obtained by Business Insider shows that Tesla notified workers that, beginning Monday, they would work 11 hours during the day and 10.5 hours during the night. If Tesla Cybertruck is production-constrained, as Elon Musk announced during the Q4 2023 earning call in January, why would Tesla want to produce less?