Tesla CEO Elon Musk reportedly sent an email to the automaker’s executives, informing them that due to overstaffing, Tesla will be reducing salaried headcount by 10%, and that worldwide hiring should be paused.
Though Musk said that the move does not apply to “anyone actually building cars, battery packs or installing solar” – and that “hourly headcount will increase,” Tesla shares dropped more than 9% in pre-market trading on Friday, after Reuters published the report.
Musk also said that he has a “super bad feeling” about the current state of U.S. economy, prompting the “lots of luck on his trip to the moon” response from President Joe Biden.
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To further water down Musk’s “super bad feeling” comment about the economy, Biden said that other U.S. companies like IBM and Ford are expanding their investment.
“Ford is increasing their investment in building new electric vehicles,” Biden said. “6,000 new employees, new union employees I may add, in the Midwest.”
Thanks Mr President!https://t.co/dCcTQLsJTp
— Elon Musk (@elonmusk) June 3, 2022
Besides its impact on U.S. markets, Musk’s email has triggered mixed reactions with his motive being questioned. Some believe that Musk is just “tidying house” mainly due to his recent stance on remote work. Others say it may have to do with drop in sales.
Musk had earlier in the week asked Tesla and SpaceX employees to return to office or lose their job. “If you don’t show up, we will assume you have resigned,” he said in an email sent to employees.
“Anyone who wishes to do remote work must be in the office for a minimum (and I mean minimum) of 40 hours per week or depart Tesla,” Musk said in the first email, according to Electrek. “This is less than we ask of factory workers.”
“If there are particularly exceptional contributors for whom this is impossible, I will review and approve those exceptions directly,” the email continued.
“There are of course companies that don’t require this, but when was the last time they shipped a great new product? It’s been a while,” Musk wrote in the second email sent. Adding that, the more senior you are, the more visible must be your presence.
“That is why I lived in the factory so much- so that those on the line could see me working alongside them. If I had not done that, Tesla would long ago have gone bankrupt,” he said.
Australian tech billionaire Scott Farquhar, was among those critical of Musk’s new policy on remote work. Farquhar, the chief executive of Atlassian, a $48 billion software company, likened Musk’s proclamation to “something out of the 1950s” in a Twitter thread.
He pointed out that unlike Tesla, Atlassian is moving to fully embrace working from home as a “key for our continued growth.” In the end of the thread, Farquhar shared a link to Atlassian’s career page, inviting disgruntled Tesla employees to apply.
Tesla is yet to resume production in its Shanghai factory after expensive covid lockdowns initiated by Chinese authorities to curtail the recent outbreak of covid.
Reuters reported that several analysts have cut price targets for Tesla recently, forecasting lost output at its Shanghai plant.
Quoting data from company disclosures and data released on sales, the report said that China accounted for just over a third of Tesla’s global deliveries in 2022. Daiwa Capital Markets estimated on Thursday that Tesla had about 32,000 orders awaiting delivery in China, compared to 600,000 vehicles for BYD, its larger EV rival in that market, according to Reuters.
This points to a drop in sales. Tesla has also lost more than $400 billion of its value since Musk made his $44 billion bid to buy Twitter in April, a move believed to be a key factor in the electric vehicle maker’s recent ordeal.
However, with a 40-year high potential U.S. inflation and global recession buoyed by Russia-Ukraine war, some experts believe Musk is seeing something no one else is seeing.
“Elon Musk has a uniquely informed insight into the global economy. We believe that a message from him would carry high credibility,” Adam Jonas, an analyst at Morgan Stanley, said in a report.
But with the performance of other EV makers in China and the U.S., Tesla recent losses have been largely attributed to Musk himself. Musk has been criticized for tweeting and sending not well thought-out messages impacting stocks – and Tesla is the biggest victim.
Perhaps @elonmusk super bad feeling about the economy, which caused him to abruptly freeze hiring and announce a 10% cut in salaried positions, will convince him to walk away from $TWTR since a recession would hurt TWTR’s ad biz even quicker. This could be worth ~10% to $TSLA, Gary Black, investment adviser with The Future Fund tweeted.
Perhaps @elonmusk super bad feeling about the economy, which caused him to abruptly freeze hiring and announce a 10% cut in salaried positions, will convince him to walk away from $TWTR since a recession would hurt TWTR’s ad biz even quicker. This could be worth ~10% to $TSLA.
— Gary Black (@garyblack00) June 3, 2022
Musk had previously run into trouble with the SEC over his tweets. The Commission reportedly wrote letters to Tesla in 2019 and 2020, respecting Musk’s tweets that violated a court agreement requiring the company’s lawyers to sign off on some of his tweets in advance. The SEC pointed to a 2019 tweet in which Musk boasted about Tesla’s future production capacity, and a 2020 tweet where he said Tesla’s stock price is “too high imo.”
Despite the ‘tame it’ call by worried Tesla investors, Musk has continued to tweet his views on markets, products and services, moving stocks up and down minutes after he hits the send button.
“Very frustrating day for Tesla bulls. The Musk email in light of jittery macro/backdrop adds to nervousness around Tesla and R word. Another misstep from a PR perspective-the wrong email at the wrong time. Oversold on news but as we always say; perception is reality in this tape,” Dani Ives, tech analyst at Wall Street wrote.
“Do you hear Cook talking supply chain? Nadella talking cloud/demand trends? Lisa Su talking chip demand and hiring trends? Musk goes to the beat of a different drum (and his worldwide influence is unique)… understand situation and backdrop before hitting send on email!” he added.