We are getting more information on the ongoing layoffs at Tesla. Several employees describe the situation as Elon Musk “throwing his weight around” to solidify his status after being mostly absent over the last year.
But he is coming in like a dangerous wrecking ball.
Sources familiar with the matter told Electrek that Musk was not as frequently present at Tesla as he used to be over the last year and since his acquisition of Twitter.
That has changed over the last few weeks.
Musk is now all over Tesla or at least, his presence is being felt everywhere at Tesla.
It started with the first wave of layoffs two weeks ago. Musk announced that Tesla would be laying off about 10% of its workforce and used his usual excuse of growing the headcount too fast, resulting in hiring inefficiencies with duplicate jobs.
However, when we first heard about those plans a day prior, we heard that the layoffs could be closer to 20% of the workforce.
Sure enough, the layoffs are still ongoing.
Tesla started another wave of layoffs this week – including the entire charging organization.
Now, Electrek has learned that Musk also gutted Tesla’s cathode material manufacturing team in Texas.
It started with Anthony Thurston, Senior Manager, Cathode Materials & Manufacturing at Tesla, earlier this month, but Electrek has learned that Musk has now let go of most of the team.
Sources familiar with the matter describe a difficult situation at Tesla right now. Uncertainty, confusion, and frustration are the main feelings going around the offices.
Several sources confirmed that there are rumors around Tesla that the vehicle engineering and design departments are next.
During Tesla’s earnings call last week, Musk commented a bit more on the layoffs. This time, he said it was about “reorganizing” the company:
We’ve made some corrections along the way. But it is time to reorganize the company for the next phase of growth and you really need to reorganize it.
Analysts and Tesla fans are trying to understand the logic behind some of these moves and the firing of almost the entire charging organization, around 500 people, has been hard to understand for most people.
Musk said that Tesla still plans to grow the Supercharger network but with a focus on existing stations:
We reported that Tesla has already backed out of leases for new Supercharger stations.
Sources say that Tesla will have issues continuing to grow the network without the organization of Rebecca Tinucci, Tesla’s former head of charging.
In the past, Tesla rehired people it fired after realizing that it couldn’t get the work done without them.
This is raising questions about the logic behind some of the layoffs and their efficacy.
Sources familiar with the matter believe that some of the layoffs have nothing to do with hiring inefficiencies or restructuring, but rather with Musk throwing his weight around Tesla.
Two sources told Electrek that Tinucci was fighting back pressure from Musk to fire a bigger percentage of her team, and the CEO decided to let go of the entire team as an example.
Musk wrote in an email to executives on Sunday:
“Hopefully, these actions are making it clear that we need to be absolutely hard-core about headcount and cost reduction. While some on exec staff are taking this seriously, most are not yet doing so.”
The message is clear: fire people as many people as I’m asking, or you and your entire team will be gone.
Electrek’s Take
This is clearly about more than hiring inefficiency and restructuring. Musk is cleaning house. It could be that he has serious concerns about the economy and lack of reversal for Tesla’s sales in the short term, but he didn’t go into that in the earnings call last week.
It could be about more than that. I don’t know if I completely agree with the theory that Musk is securing his leadership position at Tesla, but it is a viable theory.
As I previously presented, the vote on his compensation package is turning into a vote of confidence in the CEO.
These layoffs are useful for him on that front. A lot of the leadership is gone. With every leader leaving, Musk becomes more needed at Tesla. Also, it doesn’t hurt that all these leaders are unloading their stocks, which won’t be voted against him.
However, it raises the question: is it actually good for Tesla?
The Supercharger team did something incredible: build the only successful and liked fast-charging network in North America, which is critical to EV adoption.
Firing the entire team because the head was pushing back on the number of layoffs is ridiculous, especially if the plan is still to grow the network. Tesla needs to grow the network since it is currently onboarding other automakers on it. Even if Tesla sees its own sales slowing down, the Supercharger network will need a capacity increase.
Everyone I talked to at Tesla says that it is a complete mess. Contractors for most ongoing Supercharger projects lost their point of contact at Tesla. Again, many suspect Tesla will try to rehire some of the workers fired.
Tesla has hiring inefficiencies leading to layoffs and layoffs inefficiencies leading to new hires.
It’s not a good look.
The only way I can get behind Musk on this is if Tesla’s financials are really in the dumpster. It doesn’t look that bad right now based on the financial statements, but it’s not impossible that Tesla has internal numbers, like orders coming in, that look awful.
Some of this reminds me of Tesla in 2019. Things were looking pretty good, but Tesla launched a huge cost-cutting effort. We later learned that Tesla was on the verge of bankruptcy because it didn’t anticipate how costly it would be to launch Model 3 in high volume in Europe.
The long transit time put a lot of financial pressure on Tesla, and the cost-cutting effort was intended to compensate for that – Musk didn’t communicate to shareholders until later.
Maybe there’s something similar going on that we don’t know about, but at the same time, Tesla is in a completely different situation right now, sitting on $27 billion in cash.