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Why investors hit the brakes on electric vehicles and related stocks on Monday

In the still-developing electric vehicle (EV) industry, what happens to the leading company usually impacts every other manufacturer and supplier. That’s why troubling news from the No. 1 EV manufacturer almost immediately filtered through to the rest of the industry on Monday, impacting prices at fellow manufacturers and related companies.

Emerging Asian EV maker VinFast (NASDAQ: VFS)For example, the stock price fell sharply by more than 9% that day. Developer of next generation EV batteries QuantumScape (NYSE:QS) also targeted it, with its market value falling by almost 7%. His fellow power pack specialist, Freyr battery (NYSE: FREY)managed to escape significant collateral damage, but the stock’s flat performance on the day was uninspiring.

There will be large-scale layoffs

There are no prizes for guessing which major EV company was the bearer of the bad news. It was Tesla (NASDAQ: TSLA)Naturally.

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Based on an internal company memo written by CEO Elon Musk, Business insider reported that the EV giant is about to implement a large-scale series of layoffs. That report was widely circulated in other media and caused a mild panic among investors about the EV industry as a whole.

In the memo, Musk said Tesla’s workforce will be reduced by more than 10%; he did not become more specific. He did say that the layoffs would impact the company’s employees around the world.

The high-profile CEO wrote that Tesla’s rapid growth had resulted in some duplication of functions and roles. Therefore, ‘As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the business for costs. reductions and increases in productivity.”

“There’s nothing I hate more, but it has to be done,” he continued. “This will allow us to be lean, innovative and hungry for the next growth phase cycle.”

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It doesn’t appear to be a coincidence: Drew Baglino, senior vice president of powertrain and energy engineering at Tesla, announced his resignation from the company on Musk’s X (formerly Twitter) on Monday. Baglino is the second high-ranking CEO to leave Tesla in less than a year. He did not give the reasons for his move.

If the leader stops…

The rapid (and possibly haphazard) deployment of personnel referenced in Musk’s memo only tells part of the story. Electric car sales growth has slowed significantly recently, and as competition has increased, Tesla and other manufacturers have cut prices to keep consumers happy. Meanwhile, the company’s recent delivery numbers are below analyst expectations.

If Tesla sneezes, the rest of the EV sector catches a cold. Hopefully for the industry bulls, Tesla will have more encouraging news to share soon.

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Eric Volkman has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool has a disclosure policy.

Why Investors Hit the Brakes on Electric Vehicles and Related Stocks on Monday was originally published by The Motley Fool

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