Elon Musk is a CEO who sets strict goals and often changes direction impulsively, so his employees at Tesla are used to chaos, but perhaps not to the extent of today.
But even by Tesla’s standards, it was in disarray. The stock is down more than 40% amid falling sales, confused product decisions and more price cuts. Its once dominant position in China’s electric vehicle market is under attack.
Tesla is expected to post a 40% plunge in operating profit and its first drop in revenue in four years. Musk has ordered the most layoffs at the company ever and is betting its future on a new generation of self-driving vehicles called robotaxi, Bloomberg reports.
The concept isn’t new, but the company has yet to support the infrastructure it would need, nor has it secured regulatory approval to test such cars on public roads. For now, Musk has shelved plans for a $25,000 mass-market vehicle that many Tesla investors are pushing for and believe is vital to the automaker’s future.
Redundancies and departures
In the wake of media reports of the strategic shift, key executives left.
At $469 billion, the company is still valued at more than nine times the market capitalization of General Motors or Ford. But after losing nearly $350 billion in market capitalization in four months, employees, investors and analysts are baffled and trying to second-guess the company’s strategy.
The stock continued its slide on Monday, trading down as much as 5.6% shortly after the start of regular trading. Shares are on their longest losing streak since December 2022.
Musk sent a company-wide email announcing that Tesla was cutting more than 10% of its workforce by eliminating at least 14,000 jobs.
The actual number of layoffs may exceed 20,000. Musk’s reasoning was that Tesla needed to cut workers by 20% because its vehicle deliveries were down accordingly.
Change of course
For those still working after this carnage, Musk has fundamentally changed the mandate. The company will do everything to achieve autonomy. The robotaxi now has the edge over a cheaper car, a source familiar with the design told Bloomberg.
The product that Tesla launched as Full Self-Driving (FSD) is probably a misnomer as FSD requires constant supervision, but Musk has repeatedly predicted that it is on the verge of making it a reality.
But the optimism surrounding FSD and the belief that it could create robotaxi clouds the future of Tesla’s cheaper car project. People with knowledge of Tesla’s plans have questioned whether the program has been canceled. The company is pursuing a low-cost vehicle architecture that would support many different types of models, one of which would have no steering wheel or pedals.
While the sources confirmed that robotaxi is a priority, one described the next-generation vehicle project as an effort to cut component and manufacturing costs and then apply those innovations to cheaper versions of the popular Model Y and Model 3.
Many worry that the only new model the company will offer to consumers will be the expensive and difficult-to-build pickup. The company recently recalled nearly 3,900 trucks it has sold to fix faulty accelerator pedals.
The danger of focusing on robotaxi
Tesla’s refocus on robotaxi is dangerous. While federal agencies have taken a lax approach to regulating the technology, control at the state and local levels has proven difficult in the wake of accidents involving self-driving vehicles.
However, Musk is betting that Tesla can make robotaxi a reality by making FSD (Full Self-Driving) available to more people and lowering prices
The rationale for Tesla’s layoffs was to redirect spending to robotaxi. Emails beginning “Dear Employee” were sent after midnight. At Tesla’s Nevada battery factory, scores of employees on Monday were herded into a parking lot where security guards scanned badges to tell who was working and who was fired, in a highly humiliating experience.
Around this time, the CEO learned that the company had skimped on the compensation of those who were laid off.
“It has come to my attention today that some compensation packages are erroneously low,” Musk wrote in an email to remaining Tesla employees. “I apologize for this mistake. It is fixed immediately.”
Source: OT
