Some people say that Tesla is like a "canary in a coal mine". It can often react quickly to subtle changes in the industry. It was reported on Friday that Tesla CEO musk was planning to lay off employees and suspended the global recruitment plan, releasing signs of economic recession to the industry. In an internal document, musk expressed concern about the U.S. economy, saying that he planned to cut 10% of jobs.
At the close of trading on Friday, Tesla's share price fell by more than 9%. Over the past month, the company's share price has fallen by more than 22.6%.
Relieve the pressure on employment costs and ensure profits
US President Biden responded to Musk's "bad feelings" about the economy. At a press conference held on the same day, he countered: "Ford is investing heavily in American electric vehicles and will create more than 6000 new jobs in the Midwest of the United States; Chrysler factory (now stellantis group) is also investing in the electric vehicle industry in the United States to produce automobile chips and has created more than 20000 new jobs."
Biden also said, "good luck with Musk's trip to the moon." Musk then thanked Biden on Twitter and distributed an article on NASA's selection of SpaceX as the next U.S. moon landing program.
Although the Biden Administration tried to ease the industry's concerns about the economy, the risk of economic downturn caused by high global inflation and soaring labor costs is rising.
The global COVID-19 has seriously affected the automobile supply chain. The supply chain crisis is followed by the weak demand caused by inflation. According to the latest data from the research institute wards intelligence, according to the annual rate of new cars in the United States in May, the annual sales volume was only 12.68 million, far lower than the 17million before the outbreak.
"The economic recession has been a very obvious trend. Musk has said this and is more inclined to take action, although the layoffs are not welcome." Barry Engle, a former Ford and General Motors executive, commented.
Yuzhiwei, CEO of the talent technology company hand Greater China, told China Business News: "the global economy is still full of uncertainty. Tesla may consider downsizing more from the perspective of cost and profit rationalization."
Bill Russo, founder of automobility, an automotive consulting firm, told China Business News: "it is not the first time Tesla has laid off employees. When it predicts a possible recession in the economy, Tesla will take action to deal with it, which shows that they are very sensitive to actively improving corporate profits."
From the perspective of the average sales generated by each employee of the enterprise, Tesla has not opened a gap with other automobile enterprises. According to the data provided by Adam Jonas, an analyst at Morgan Stanley, each employee of Tesla brings an annual income of US $853000 to the enterprise. In contrast, Ford, which is much larger than Tesla, also generates an average income of US $757000 per employee.
Tesla has made several rounds of layoffs
Tesla started two rounds of layoffs from the second half of 2018 to the beginning of 2019, with the layoffs of 7% and 9% respectively. Since then, Tesla has experienced two years of crazy growth, and has restarted personnel expansion. According to Tesla's annual report, the number of Tesla employees has doubled since the end of 2019. The first financial reporter inquired about the public information and found that the number of workers in Tesla's two super factories, port in China and Fremont in the United States, was close to 50000.
During the previous rounds of layoffs, musk said that he would thoroughly restructure the company's organizational structure to achieve a more optimized and flat management system.
Musk's latest layoff plan is not unprepared. He warned employees to return to work on Thursday, otherwise it would be deemed as "voluntary resignation". Musk said that all Tesla employees need to stay in the office for 40 hours a week. "If there are special circumstances that can not be achieved, it needs my special approval." He wrote in an internal letter.
Relevant people from Tesla China confirmed the authenticity of the above internal letter sent to global employees to the first financial reporter, but admitted that most of the employees in other positions in China are still working at home except factory workers and other employees who must be on duty. "Everything complies with the epidemic prevention requirements of the government and the company." An insider told China business news.
At present, the front-line workers are still very nervous. Industry insiders predict that Tesla will lay off employees from the management with higher wages, and is likely to eliminate some overlapping positions to make production more efficient. In fact, in the previous large-scale layoffs of Tesla, musk also said that the layoffs did not involve workers. Tesla workers work much longer than 40 hours a week.
Some industry insiders said that Tesla's layoffs are more of its own problems. Compared with the growth, the recruitment expansion is too fast. Efraim levy, an independent investment analyst in the United States, told China Business News: "this is the company's last resort. When you over expand, you must cut off the redundant people to make the operation more streamlined and efficient."
Some analysts believe that Tesla will not completely stop recruiting while laying off staff, but will adopt the method of "cutting while recruiting" to minimize enterprise expenses.
"Musk is very smart. The current global economic situation is not good. Tesla hired too many people in the past few years, which made it expensive. So by cutting off the people who had previously hired expensive people and recruiting a group of relatively cheap labor, we can achieve dynamic adjustment and reduce enterprise expenses." Zhang Junyi, the managing partner of Aowei consulting, told China business news.