Tesla (Nasdaq: TSLA) stock is off to a bumpy start in 2024, and it’s still early in the year.
On Monday, CEO Elon Musk revealed he would be laying off 10% of the company’s global workforce, a move that comes as the EV maker faces heightened competition from China.
The layoffs are part of a one-two punch that includes two key Tesla executives announcing their resignations, sending shares spiraling by 8.2% this week so far. In addition to the job cuts, engineering exec Drew Baglino, who has been by Musk’s side for nearly two decades, and Rohan Patel, an eight-year alum, announced they’d be departing too, adding uncertainty to an already questionable near-term demand outlook.
The latest sell-off adds insult to injury for a stock that has been battered of late, losing nearly one-third of its value in Q1 alone. The EV playing field is more crowded these days, giving consumers more options and causing Tesla to go on defense for a change. Nevertheless, Musk remains resolute, stating in an internal memo:
“[We] have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.”
Cost-Cutting Measures
Tesla, which at last check employed approximately 140,000 individuals, has been facing increased competition, especially from the likes of China’s BYD and Xiaomi. Musk recently conceded that aside from Tesla, domestic Chinese companies could round out the top 10 EV makers.
In response, Tesla has been tightening its belt after suffering a year-over-year decline in vehicle deliveries in Q1, its first such setback since the pandemic. Tesla, which was recently muscled out of the top EV maker spot by BYD, cut prices on its Model Y vehicles this year amid record inventory levels (though prices were said to be creeping back up as of March.) Additionally, Tesla slashed the price of its self-driving monthly subscription service in half from $199 to $99, combined moves that are expected to pressure margins. While Musk has time to right the ship before year-end, the company is navigating some unchartered waters as EV sales momentum has weakened so far this year versus 2023.
Mixed Markets
Despite Tesla’s woes, the broader markets are holding their own, with the Nasdaq, which has set six fresh record highs year-to-date, and S&P 500 showing fractional declines while the Dow Jones Industrial Average is eking out modest gains. The Dow is buoyed by shares of UnitedHealth (NYSE: UNH), whose shares are up 6% today after exceeding Wall Street’s Q1 revenue estimates.
According to FactSet research, there is more where that came from, as “eight S&P sectors are reporting or are expected to report year-over-year revenue growth for Q1 2024.”
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