Tesla’s profits have dropped by more than half this year, prompting the company to accelerate the launch of new models and implement significant job cuts in an effort to reverse its financial decline.
In the first three months of the year, the electric vehicle manufacturer reported earnings of $1.13 billion, a sharp decrease from $2.51 billion during the same period last year. Elon Musk’s Tesla announced plans to eliminate over 6,000 positions at its facilities in Texas and California. The company attributes its challenges to declining demand and increased competition from lower-cost Chinese imports, resulting in a 43% decline in its stock price throughout 2024.
Earlier this month, it was announced that the company would reduce its global workforce by 10%. Despite analysts’ expectations of revenues surpassing $22 billion, the first quarter of 2024 saw a revenue of $21.3 billion.
However, Tesla’s decision to accelerate the launch of new models, originally planned for the second half of 2025, led to a surge of nearly 12.5% in its shares during after-hours trading. Details regarding the pricing of these upcoming vehicles were not disclosed.
Elon Musk is set to address investors in a conference call to provide further insights into the new models, which may include the Model 2, a more affordable Tesla vehicle that was reportedly put on hold in April, according to Reuters. Despite facing declining sales, the company has embarked on a campaign to attract new customers by reducing prices in various markets.
Tesla stated that its circumstances were not unique, noting that global electric vehicle (EV) sales faced challenges as many automakers prioritized hybrids over EVs. Additionally, the market has been flooded with Chinese models offering competitive pricing and reliability, contributing to Tesla’s share price decline of approximately 40% since the beginning of the year.
However, Tesla has encountered similar fluctuations in its stock price previously, dropping to as low as $113 in January 2023 before rebounding by more than double.
Despite these challenges, Tesla’s woes continue as the company recently issued recalls for thousands of its new Cybertrucks due to safety concerns.
Despite originally planning to introduce new models next year, the company is now reducing its workforce. Tesla announced that it will cut 3,332 jobs in California and 2,688 positions in Texas, effective from mid-June.
The Texas cuts amount to 12% of Tesla’s nearly 23,000-strong workforce in the region where its gigafactory and headquarters are located. Despite this, Mr. Musk attempted to minimize the impact of the move, stating, “Tesla has now created over 30,000 manufacturing jobs in California!” in a post on his social media platform X, formerly known as Twitter, on Tuesday. Additionally, 285 jobs will be lost in New York.
Tesla’s total workforce exceeded 140,000 by the end of last year, up from around 100,000 at the close of 2021, according to the company’s filings with US regulators.
The car company is grappling with additional challenges, including an ongoing dispute regarding Mr. Musk’s compensation. On Wednesday, Tesla urged shareholders to vote on a proposal to approve Mr. Musk’s compensation package, initially valued at $56 billion, which had been previously dismissed by a Delaware judge.
The judge ruled that Tesla’s directors had violated their fiduciary duty to the company by granting Mr. Musk the payout. With Tesla’s stock value declining, the compensation package is now estimated to be approximately $10 billion less, still surpassing the GDP of numerous countries. Furthermore, Tesla is seeking shareholder approval to relocate the company from Delaware to Texas, a move advocated by Mr. Musk following the judge’s rejection of his compensation.
Read More: Tesla owners instructed to avoid wearing Apple VR headsets while driving.
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