Tesla plans to lay off 6,020 employees in Texas and California as part of its strategy to address declining demand and decreasing profit margins, reported news agency Reuters.
This comes amid increasing pressure on the company due to a decrease in sales and increased competition in the electric vehicle market. The EV manufacturer saw a decline in its quarterly profits for the first time since 2020, as per media reports on Tuesday.
Tesla CEO Elon Musk is expected to provide further details on the company's strategy during a meeting on Tuesday. Last week, Tesla had hinted at a workforce reduction of more than 10% globally but had not specified the exact number of employees affected.
According to notices sent to the states of Texas and California on Monday, Tesla will cut 3,332 jobs in California and 2,688 positions in Texas, starting from June 14th.
These notifications are in compliance with US labour laws, which mandate companies with 100 or more employees to give a 60-day notice before major layoffs or closures.
In a social media post on Tuesday, Musk highlighted Tesla's contribution to job creation in California, stating that the company has generated over 30,000 manufacturing jobs in the state.
However, the job cuts in Texas will affect approximately 12% of Tesla's workforce in the greater Austin area, where the company's gigafactory and headquarters are located.
Additionally, the layoffs will impact 285 employees at Tesla's Buffalo, New York facility, which houses the labelling team for its Autopilot driver assistance software.
Tesla's workforce had grown in recent years, reaching over 140,000 employees by the end of last year, up from around 100,000 in 2021, according to filings with US regulators.
The decision to downsize comes amid challenges for Tesla, including the cancellation of a long-promised affordable car priced at around $25,000, as reported by Reuters on April 5th.
The affordable model was anticipated to drive mass-market growth for the company. Moreover, Tesla has been slow in updating its existing models, while competitors in China, the largest auto market globally, are introducing cheaper alternatives.
Furthermore, consumers are increasingly opting for less-expensive gasoline-hybrid vehicles due to their extended driving range, posing further challenges for Tesla in maintaining market share and profitability.
