Tesla Accelerates Release of New Models Amidst Profit Downturn

Tesla's profits have undergone a significant decline this year, more than halving compared to the previous year. In response, the electric vehicle (EV) manufacturer, led by billionaire Elon Musk, announced plans to accelerate the launch of new models while implementing substantial job cuts. For the first three months of the year, Tesla reported a profit of $1.13 billion, down from $2.51 billion during the same period last year. The company also revealed its decision to eliminate over 6,000 positions at its facilities in Texas and California. Factors contributing to Tesla's challenges include dwindling demand and increased competition from lower-priced Chinese imports, resulting in a notable 43% drop in its stock price throughout 2024.

Earlier this month, Tesla announced plans to reduce its global workforce by 10%. Despite this move, the company's first-quarter 2024 revenues of $21.3 billion fell short of analysts' expectations, which had predicted revenues slightly exceeding $22 billion. However, Tesla's decision to accelerate the launch of new models, originally slated for the second half of 2025, resulted in a significant uptick of nearly 12.5% in its shares during after-hours trading. While the EV maker did not disclose specific pricing details for the upcoming vehicles, CEO Elon Musk is expected to provide further insights during an investor conference call. Among the anticipated models is the Model 2, a more affordable Tesla vehicle, although reports suggest its development was put on hold in April. Despite these challenges, Tesla has been proactive in attracting new customers by reducing prices across various markets, aiming to counteract declining sales.

Tesla emphasized that its challenges are not unique within the global electric vehicle (EV) market. The company pointed out that global EV sales are facing pressure as many automakers prioritize hybrid vehicles over EVs. Additionally, the market has been inundated with Chinese EV models offering competitive pricing and reliability, undercutting Tesla's price point. Consequently, Tesla's stock price has experienced a decline of approximately 40% since the beginning of the year.

However, Tesla has encountered similar issues with its stock price in the past, experiencing lows such as $113 in January 2023 before rebounding and more than doubling. Despite these fluctuations, Tesla's woes continue, as the company recently had to recall thousands of its new Cybertrucks due to safety concerns.

‍Company Implements Job Cuts Amidst Economic Challenges

Despite accelerating the launch of new models originally slated for next year, Tesla is reducing its workforce. The company announced that it would cut 3,332 jobs in California and 2,688 positions in Texas, with layoffs starting in mid-June. In Texas, these cuts represent 12% of Tesla's workforce, which totals nearly 23,000 and includes its gigafactory and headquarters.

However, Elon Musk attempted to mitigate concerns about the layoffs. In a post on his social media platform X (formerly Twitter), he highlighted Tesla's contribution to job creation in California, stating, "Tesla has now created over 30,000 manufacturing jobs in California!"

Additionally, 285 jobs will be eliminated in New York. Despite these layoffs, Tesla's overall workforce grew to more than 140,000 employees by the end of last year, up from approximately 100,000 at the close of 2021, as reported in the company's filings with US regulators.

A Look at Compensation Amidst Company Changes

In addition to its workforce reductions and financial challenges, Tesla is embroiled in a dispute over Elon Musk's compensation package.

On Wednesday, Tesla urged shareholders to vote on a proposal to approve Mr. Musk's compensation package, which was previously valued at $56 billion but was rejected 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.

Due to the decline in Tesla's stock value, the compensation package is now estimated to be approximately $10 billion less, although it still exceeds the GDP of many countries.

Furthermore, Tesla is seeking approval from its shareholders to relocate the company from Delaware to Texas -  which Mr Musk called for after the judge rejected his payday.

Source: BBC News