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Layoffs at Tesla are hitting top performers and cuts are being made in some departments, sources say

Tesla management told the story employees Monday that the recent layoffs — which saw some departments stripped by 20% and even hit top performers — were largely due to poor financial performance, a source familiar with the matter told TechCrunch.

The layoffs were announced to employees just a week before Tesla was set to release its first-quarter earnings results. The move comes as Tesla has seen its profit margin shrink in recent quarters, due to an EV price war that has been going on for at least a year. The company delivered a record number of 1.81 million vehicles in 2023. However, margins took a hit after Tesla repeatedly cut prices in an effort to boost sales and undercut competition.

Tesla told employees that more than 10%, or about 14,000 employees, will be laid off within the global organization that has operations in the United States, Europe and China. The layoffs, which affected employees across all departments and seniority levels, were done to reduce costs and increase productivity in preparation for the “next phase of growth,” according to an internal email from CEO Elon Musk seen by TechCrunch.

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High achievers also cut

Many of the laid-off employees performed well, according to two sources who spoke to TechCrunch on condition of anonymity. One source expressed shock at the number of talented employees being cut back, noting that many of those affected were working on projects that have fallen lower on Tesla’s priority list. The source declined to specify which projects.

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According to sources, some departments saw layoffs above the 10% outlined in the company-wide email. One manager told TechCrunch that 20% of their employees were laid off.

“I lost 20% of my team, and some really good players too,” they said.

The shake-up also comes as Musk continues to shift the company’s trajectory toward building fully self-driving cars. Tesla recently dropped plans to build a cheaper electric car that would retail from around $25,000, opting instead to use the underlying platform being developed to power an alleged robotaxi whose Musk said it will debut on August 8.

According to his biographer Walter Isaacson, Musk previously tried to prioritize the specific robotaxi vehicle project. In 2022, he told employees that he wanted a “clean robotaxi” without a steering wheel or pedals. Tesla chief designer Franz von Holzhausen and engineering VP Lars Moravy continued to run the low-cost EV project in secret, eventually convincing him to create both — that is, until last week when it was reported that Musk had a change of heart.

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Top executives are leaving

Two high-profile executives – Drew Baglino, Tesla’s SVP of Powertrain and Energy, and Rohan Patel, VP of Public Policy and Business Development – ​​also left the company.

Patel told TechCrunch that he decided to leave Tesla on Sunday evening because of “[b]ig general changes” at the company. Patel, who had been in regular contact with Tesla customers and fans on speculate.” Tesla is becoming stronger than ever and change is good,” he added.

Baglino told TechCrunch that after 18 years, it was time to leave Tesla. “I feel good about the impact I have been able to achieve, my leadership team is strong, the energy companies I am responsible for are doing well, etc.,” he wrote in a message to TechCrunch.

“Baglino was in charge of power drives and new battery projects, and there is a feeling that there isn’t much innovation at the moment that is sustainable, which is probably why Baglino is leaving,” said Sandeep Rao, head of research in London. based financial services firm Leverage Shares, theorized in an interview with TechCrunch.

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Baglino’s departure comes just a few months after Tesla’s previous CFO, Zachary Kirkhorn, resigned. In January, Musk posted on Xformerly Twitter, that he would like to have about 25% of voting control over Tesla to focus more fully on the company, rather than his other businesses, and help the EV maker become a leader in AI and robotics.

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