In that quarter, Tesla experienced a significant decline in sales due to heightened global competition, a slowdown in electric vehicle sales growth and unsuccessful attempts to attract more buyers, including with price reductions. Tesla has slashed prices by up to $20,000 on certain car models since late last year. However, these price adjustments not only caused a depreciation in the resale value of used EVs but also impacted the company's profit margins negatively.
The company was only able to deliver 386,810 vehicles from January to March, a nine percent decrease compared to the 423,000 units delivered in the same quarter of 2023.
As a result, Tesla decided to lay off more than 14,000 employees out of the 140,373 employed at the end of last year to cope with their loss.
According to several reports, CEO Elon Musk announced the layoffs through an internal company-wide email, which was subsequently leaked. Musk detailed in the email that layoffs should be done as the company prepares for its next ventures. (Related: Ford’s globalist push for more electric vehicles (EVs) DESTROYING company with massive layoff of salaried engineers.)
"We have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10 percent globally. There is nothing I hate more, but it must be done," he wrote. "This will enable us to be lean, innovative and hungry for the next growth phase cycle. I would like to thank everyone who is departing Tesla for their hard work over the years. I’m deeply grateful for your many contributions to our mission and we wish you well in your future opportunities. It is very difficult to say goodbye."
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Tesla has started to feel the impact of slowing demand for EVs
Tesla is now starting to experience the effects of declining demand for EVs, as the automotive industry only saw a modest 3.3 percent increase in EV sales in the last quarter.
According to the Associated Press, EV sales only reached nearly 270,000 units for the quarter, significantly below the 47 percent growth observed in 2023. Additionally, the EV share of total U.S. sales fell to 7.15 percent in the first quarter.
Ivan Drury, director of insights at automotive market information firm Edmunds, argued that the deceleration, primarily attributed to Tesla, validates the concerns of automakers that they may have rushed into targeting EV consumers. The initial wave of early adopters and environmentally conscious consumers have largely embraced EVs. But now, automakers find themselves grappling with a more skeptical mainstream audience.
"That's where all of those headwinds come in that we've seen in survey data," Drury said. "Those real-world concerns about charging infrastructure, battery life, insurance costs."
In turn, Tesla has decided to cancel its efforts to produce a budget-friendly car. The EV manufacturer has been sluggish in updating its aging models, partly due to high interest rates dampening consumer interest in major purchases.
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