Tesla (TSLA, Financial) is navigating through a tough year, with its shares down 33% amidst slowing growth and increasing competition. The electric vehicle giant is cutting over 10% of its workforce, approximately 14,000 jobs, as it gears up for the launch of its next-generation vehicle platform and a new robotaxi expected around 2025/2026.
Investors have typically welcomed cost-cutting strategies, but Tesla's recent layoffs underscore concerns about its near-term growth. This follows a report of an 8.5% year-over-year drop in Q1 deliveries to 433,000 vehicles, missing analyst expectations. Additionally, Tesla's growth rate slowed to its lowest since the second quarter of 2020.
In China, Tesla's second-largest market, competition from BYD Company (BYDDY, Financial), NIO (NIO, Financial), Li Auto (LI, Financial), and XPeng (XPEV, Financial) is intensifying. Reports indicate a significant drop in shipments from Tesla's Shanghai factory and a reduction in production due to decreased demand.
The anticipated boost from the Cybertruck launch has been marred by delays and recent reports of halted deliveries due to an issue with the accelerator pedal. Despite the low impact on overall delivery numbers, concerns linger over the demand for Cybertruck, especially since only the priciest model is currently available.
Tesla has also slashed the price of its Full Self-Driving (FSD) subscription to $99/month from $199/month. This move aims to stimulate demand following several vehicle price cuts in China and the U.S., showcasing Elon Musk's confidence in the FSD technology after significant investment.
The job cuts might improve Tesla's earnings in the short term, yet they highlight the company's dwindling growth prospects. As Tesla prepares for its next-generation platform, which should support mass-market vehicle production, the timing and scale of these layoffs raise eyebrows, especially given the slowdown in growth.
