Tesla’s (TSLA) job cuts reported by media outlets represent “another dark day” for the electric vehicle maker following a first-quarter delivery miss and the overall pressure on the business, Wedbush Securities said Monday.
Tesla will lower its global headcount by more than 10% in a bid to cut costs, media outlets reported Monday, citing an e-mail sent to employees by Tesla Chief Executive Elon Musk. “Over the years, we have grown rapidly with multiple factories scaling around the globe,” resulting in duplication of certain roles and job functions, Musk reportedly wrote. “As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity.”
Drew Baglino and Rohan Patel, who was Tesla’s policy chair, are no longer with the company, Electrek reported. Tesla didn’t respond to MT Newswires’ request for comment.
The company’s shares were down 5.2% in Monday late-afternoon trade, likely “exacerbated” by the news of Baglino’s departure, Wedbush analysts, including Daniel Ives, said in a note. “Baglino is an absolute gut punch loss in our view as he was instrumental in the Powertrain and Energy initiatives at Tesla and was viewed by many as key to the Model 2 initiative over the next few years.”
Earlier this month, Tesla’s first-quarter vehicle deliveries missed analysts’ expectations and decreased both on sequential and annual bases, partially impacted by factory shutdowns. “While Tesla is being proactive about cost cutting this time around given the disastrous (first-quarter) deliveries and overall pressure on the business, this is a large cost-cutting initiative for a company in between two growth waves,” Wedbush said.
Tesla’s stock is down nearly 35% so far this year. The company is scheduled to report its first-quarter financial results April 23. Stakeholders will likely be seeking the rationale for the cost cutting and a product roadmap, Wedbush wrote. “Otherwise many investors might head for the elevators during this category 5 perfect storm of weak demand Tesla is seeing globally in 2024.”
Wedbush maintained its outperform rating on the Tesla stock, with a $300 price target, saying it continues to be “long term bullish” on the company. However, Tesla’s future is “a bit murky now,” the analysts wrote. “Musk needs to give the clear roadmap and strategic vision for the Street with Model 2 a key component.”
Last week, Wedbush said that the Model 2 vehicle was likely to be a “key part” of the future growth story for Tesla, as a sub-$30,000 price point would help drive mass demand globally.