Tesla layoffs, car company battle royale

On June 3, an email from Reuters broke the news like an extraterrestrial meteorite and smashed into Tesla’s large pool.

According to Reuters, Tesla CEO Elon Musk said in a “suspend all global hiring” email to company executives that “Tesla needs to cut jobs by about 10%.” According to Tesla’s latest financial report submitted to the SEC, if the news is true, the layoffs may affect nearly 10,000 people.

Just a few days ago, Reuters also broke the news that Musk made a strong statement in an email to company executives, requiring company employees to work at least 40 hours a week in the office or leave Tesla. In the post-epidemic era, working from home has become one of the ways for technology companies to attract talents, so comments generally believe that Musk’s move is intended to force employees to leave.

Affected by this, as of the close of U.S. stocks on June 3, Tesla’s stock price plummeted 9.22%, and its market value evaporated by more than 73 billion US dollars overnight, or about 490 billion yuan.

Although Musk announced on Twitter on June 5 that the total number of Tesla employees will grow in the next 12 months, the number of employees receiving fixed salaries will be relatively stable. But the prevailing view is that Musk’s remarks are more to stabilize market sentiment.

Tesla is laying off workers.

Tesla’s internal and external troubles

In an email to executives, Musk blamed a “very bad feeling” about the economy for the layoffs. The decision to lay off 10% of the workforce based on “feelings” may be a little tricky, but Musk’s concerns about the economy are by no means unreasonable.

Since the epidemic, in order to stabilize the economy, the Federal Reserve has continued to release water, and the inflation rate has remained high. The turning point came on June 1, when the Federal Reserve announced that it would officially start shrinking its balance sheet and that it would recover $3 trillion from the market within three years. This means that there will be a massive reduction in the number of dollars in circulation in the market, and people will be more speculative in holding the currency, and there may even be a repeat of 1929.

This trend is evident in the U.S. auto market. The latest data from research firm Wards Intelligence shows that according to the annualized rate of new vehicles in the United States in May, the annual sales volume was only 12.68 million vehicles, far below the 17 million vehicles before the epidemic.

Aside from the crisis in the external environment, Tesla is also facing many challenges at the moment.

Affected by the Russian-Ukrainian war, global car companies have fallen into a supply chain crisis, with a serious shortage of production capacity. To make matters worse, due to the impact of the epidemic in China, the Shanghai Gigafactory, which delivered 58.76% of Tesla’s total global market share in the first quarter, was shut down for three weeks. Tesla’s domestic sales in April were only 1,512 vehicles, down 94.15% year-on-year and 97.70% month-on-month. %.

Tesla was also embroiled in a dispute over the “ghost brake” incident in February. The U.S. National Highway Traffic Safety Administration has announced a formal investigation into 416,000 Tesla vehicles. This also means that in the future, Tesla will need to spend more energy on negotiating with the government.

At the same time, with the rapid expansion of Tesla in the past two years, the number of its employees has also surged, but its per capita income generation is not ideal. According to public data, in 2021 alone, Tesla will recruit 28,533 new employees worldwide, an increase of more than 40%. But the corresponding annual revenue per employee is $853,000, which is not significantly different from other larger companies.

Under the influence of pessimistic market expectations, endless black swan events, and the legacy of Tesla’s own rapid development, controlling costs through layoffs is undoubtedly Tesla’s best choice.

The richest man’s economic layoff law

Judging from Tesla’s past history, in the face of possible crises, laying off some employees is its usual method. In both crises in 2018 and 2019, Tesla chose to cut costs to control costs.

And according to Goldman Sachs analyst Mark Delaney, the 10% layoff could save Tesla about $225 million to $1 billion in annual operating costs.

Strangely, the layoffs do not seem to have affected Tesla China. According to Jiemian News, a relevant person close to Tesla China revealed that there has been no news of layoffs. Not long ago, they were recruiting people on a large scale. Compared with the past, this recruitment was more intensive, with engineer positions as the main job. host.

It is not difficult to speculate that this may have a lot to do with Tesla’s still hot demand and the good performance of Tesla China itself.

After the layoff letter was exposed, foreign media revealed more details in the letter, including that the layoffs did not include front-line employees. Industry insiders speculate that Tesla’s business is currently in the expansion stage, and a large number of front-line employees are still needed to ensure the delivery of electric vehicles. Tesla’s layoffs may start with higher-wage management to make production more efficient.

Among the four super factories owned by Tesla, only two factories in Shanghai and California can support production capacity, and the Shanghai factory has increasingly become Tesla’s most important production capacity weapon.

According to Tesla’s 2021 financial report, the Shanghai plant’s deliveries in 2021 will account for 51.7% of Tesla’s total deliveries, with an annual output of more than 500,000 vehicles. In the latest financial report for the first quarter of 2022, this proportion continued to rise. Among the 310,000 Teslas delivered globally, the Shanghai plant in China accounted for 182,200, accounting for more than 58%. The average production of each car The time is just over 38 seconds (calculated on a 24/7 basis).

The key is that most of the major component manufacturers that have entered the Tesla Shanghai factory supply chain are located within 500 kilometers of the Shanghai factory, including Shanghai, Hangzhou, Nanjing and other cities, which is what we usually understand as free shipping District, the industry calls it Tesla’s “four-hour circle of friends”. Relying on this layout, Tesla China has completed efficient and precise management of the supply chain. At present, the localization rate of parts and components in Tesla’s Shanghai plant has reached more than 90%, which has reduced the manufacturing cost of Tesla vehicles to a considerable extent. In the financial report, in the first quarter of this year, Tesla’s net profit attributable to its parent reached 21.5 billion yuan, a year-on-year increase of 658%, and the gross profit margin reached an astonishing 32.9%.

It is worth mentioning that, according to a previous report by First Finance and Economics, with the support of the government, the number of workers in Tesla’s factory has recovered rapidly, and on May 23, it has been upgraded from single-shift production to double-shift production.

It’s no surprise that Musk tweeted praise for Chinese workers in May of this year, “Not only will they stay up late, they will work hard at three in the morning, and they won’t even leave the factory.”

In the final analysis, the focus of “reducing staff and increasing efficiency” is whether to increase efficiency, not reduce staff.

The battle royale of new energy car companies

It’s not just Tesla that has laid off employees, there are many companies that have laid off employees this year. In the face of weak growth, major manufacturers including Tencent and Alibaba have chosen to lay off employees. The new domestic forces that were still robbing people last year have reported breaking their contracts this year.

According to tech employment tracking website layoff.fyi, 66 tech companies around the world issued a whopping 16,800 layoff notices last month, more than the 13,600 layoffs of 52 companies in the first four months of this year combined. It reached the highest number of layoffs in a single month since May 2020.

In the past six months, the Nasdaq has fallen by 30.5%, and the technology industry has experienced a decline in valuation, a decline in stock prices, and a slowdown in the financing cycle.

Some people believe that the economic recession is already a very obvious trend, and Tesla’s layoffs are actually sounding the alarm for other car companies.

Because from the financial report, Tesla’s performance in the first quarter was very bright. Data shows that Tesla’s total revenue in the first quarter was 121.6 billion yuan, with a net profit of 21.38 billion yuan and a staggering 70,000 yuan per car.

How good is this financial report? Compare it with the domestic leader BYD. According to BYD’s recently released financial report, in 2022, the net profit attributable to the parent in Q1 will be 650-950 million yuan, and the net profit of a bicycle will be 480-1,510 yuan.

Looking at the financial reports of other domestic new energy vehicle companies, Wei Xiaoli is still in a state of loss, not to mention others. Even so, Tesla began to shrink and diet in preparation for the winter.

The market is not humane.

If Musk’s prediction that the U.S. economy will continue to decline for 12-18 months is true, there will be serious asset depreciation. Considering the impact of the U.S. economy on the world economy, new energy car companies will also welcome Here comes a new round of industry reshuffle.

Cut R&D, optimize manpower, shrink business, it’s all fine. After all, for new energy car companies, survival is the most urgent thing at present.