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Text / Liu Xingzhi
Source/Alphabet List (ID: wujicaijing)
Musk is unleashing a surprise layoff plan inside Tesla.
In response to Reuters’ report on June 3 that Tesla will “cut about 10% of its jobs” and suspend global recruitment, a Tesla China HR told the Alphabet that no notification has been received yet.
Tesla’s annual financial report filed with the U.S. Securities and Exchange Commission (SEC) in February showed that as of the end of 2021, its global workforce was 99,290, which means the layoffs will affect nearly 10,000 people.
Affected by the news, Tesla’s shares fell 9.2% on Thursday local time, the biggest drop since the end of April.
After sending the layoff email to executives, Musk hurriedly sent an explanation email to all employees on Friday, local time, saying that the company’s 10% layoff plan is only for salaried employees (that is, regular employees), because Tesla La “has already seen over-editing in many areas”. Line workers who make cars, battery packs or install solar are not affected, and Tesla will continue to ramp up its hiring of hourly workers.
In an email announcing the layoffs, Musk said: “I have a super bad feeling about the economy.”
Musk has expressed his pessimistic expectations for the economy many times during the year, and believes that the U.S. economy is approaching a recession, and he is even more dissatisfied with the current Democratic administration of the United States led by Biden. Lots of contradictions.
In mid-May, with Tesla’s removal from the S&P 500 ESG Index, Musk publicly announced that he had changed his flag, switching from his usual Democratic support to a Republican vote.
On the night that the layoffs were revealed, Musk announced on Twitter that he was a candidate for mayor of Los Angeles, and the billionaire Caruso, who was turned from the Republican to the Democratic Party, stood on the platform. “It’s a blessing for the people of Los Angeles to have someone like Rick Caruso running for mayor, he’s amazing,” Musk wrote, noting that Caruso, who joined the Democratic Party, has publicly stated ” I’m not going to be a typical Democrat,” but the change in Musk’s political leanings is quite similar, and the two have a fairly consistent attitude toward cryptocurrencies.
With repeated epidemics, conflicts between Russia and Ukraine, and black swans sweeping the world in droves, Tesla is not the only technology company that has laid off employees. Affected by stock prices and inflation, 66 tech companies around the world issued up to 16,800 dismissal notices in May, the largest number of layoffs in a single month since May 2020, according to data from tech employment tracking website layoff.fyi.
In China, affected by rising raw material prices and the shutdown of Shanghai, car companies such as Ideal and Xiaopeng, which were still rushing people at high prices last year, were also exposed to stop recruiting, and even lay off fresh graduates to optimize the team to prepare for the winter.
Faced with the bad economic situation, Musk, the world’s richest man, couldn’t sit still and began to “reduce costs and increase efficiency.”
A
In an email to executives, Musk blamed himself “having a super bad feeling about the economy” as a direct cause of the layoffs.
Musk’s gloomy economic outlook dates back to the beginning of the year. At Tesla’s 2021 shareholder meeting in March this year, Musk made it clear that Tesla is facing huge cost pressures on the supply chain side, so it has to raise the price of Tesla cars.
Later, he tweeted that his company is not alone in facing inflationary pressures at a time when global commodity prices have soared to their highest levels since 2008.
The last time Musk expressed concern about the economy was on May 26. When a netizen asked him on Twitter if he thought the U.S. economy was approaching a recession, Musk replied: “Yes, but this is actually a good thing, Sprinkling money on fools has been going on for too long, it’s time for some bankruptcy.” He also said that, as a rule of thumb, recessions will last 12-18 months.
Apart from the pessimistic expectations for the future, Tesla is in a difficult situation right now, and the epidemic is the primary influencing factor.
In the first quarter of this year, Tesla delivered 310,048 vehicles, a year-on-year increase of 68%, of which Tesla’s Shanghai Gigafactory delivered 182,174 vehicles, accounting for 58.76% of Tesla’s total global market share. In April of this year, affected by the Shanghai epidemic, Tesla’s domestic sales were only 1,512, down 94.15% year-on-year and 97.70% month-on-month.
At present, although production has resumed, under the influence of epidemic prevention and control and the supply chain, Tesla’s Shanghai factory still needs to go through a long climb to restore its production capacity before the epidemic. The “misfire” of the Shanghai factory obviously slowed down the progress of Tesla’s capacity expansion.
As a result of limited production capacity, stock prices are under pressure. A few days ago, Wall Street investment firm Wedbush analyst Dan Ives lowered his price target for Tesla from $1,400 to $1,000, a cut of nearly 30%. He said Tesla is facing more production slowdowns and supply chain bottlenecks caused by the outbreak. In addition, Musk’s acquisition of Twitter is also a potential headwind for Tesla’s stock price decline.
As of the close on June 3, Tesla’s stock price fell 9.22% to $703.55 per share, down more than 40% from the high at the beginning of the year, underperforming the Nasdaq 100 Index.
Against the background of the superposition of various unfavorable factors, it is not surprising that the richest man in the world chose to use his employees to “reduce costs and increase efficiency”.
Layoffs are “cost reduction”, and before the layoff news came out, Musk had already thought about measures to “increase efficiency” for the remaining employees.
On the evening of May 31, Eastern Time, Musk sent an email to employees with the subject “No longer accepting remote work”, requiring Tesla employees to work in the office for at least 40 hours a week, and released harsh words : “If you do not show up, we will acquiesce that you have resigned.”
It is worth noting that during the epidemic, technology companies such as Google, Meta, and Airbnb have begun to allow employees to work remotely permanently. Nick Bloom, a professor of economics at Stanford University, believes that Musk’s move will allow SpaceX and Tesla to work. Losing about 10%-20% of their existing workforce, recruiters at other companies will try to poach their employees by offering more flexible work options.
Musk’s move was therefore regarded as a disguised layoff.
B
This is not the first time Tesla has made massive layoffs. In recent years, whenever the company faces a crisis, it has become a routine operation for Musk to take employees.
The last time Tesla made major layoffs was in 2019. On January 18 of that year, at the beginning of the new year, Musk sent an email to all employees, announcing that he would cut about 7% of his full-time employees.
There are two major factors behind the layoffs in 2019.
The first is the impact of policy. The first 200,000 electric vehicles sold by automakers are eligible for tax credits under a tax reform package passed by the U.S. Congress in 2017. The tax credit is reduced by 50% every six months until it is phased out. Beginning January 1, 2019, the federal tax credit for electric vehicle buyers in the U.S. will halve from $7,500 to $3,750, before dropping further to $1,875 in July.
“Right now, our most affordable product is the mid-range (264-mile) Model 3, which costs $44,000,” Musk said in an email. “Demand for the lower-priced Model 3 will become greater on July 1, because by then The U.S. tax break will be cut in half again, raising the price of our cars by $1,875. By the end of the year, the incentive will be completely over.” The pressure to cut prices from the decline of the tax break has led Musk to consider layoffs.
In addition, in June 2018, Tesla overestimated its own production efficiency and laid off 9% of its employees, which caused the Model 3 assembly process to become what Musk called “production hell”, and Tesla, which was severely understaffed, had to Restart mass recruitment.
“Unfortunately, we have no choice but to lay off about 7% of our full-time workforce (up 30% last year, more than we can afford), and keep our most important temporary and contract workers,” Musk said in the email. It can be seen that the 30% increase in employees in 2018 is also a lot of pressure for Tesla.
Similar to the layoffs in 2019, Tesla’s workforce has also experienced a massive expansion before this layoff. According to Tesla’s annual report, as of December 31, 2021, Tesla and its subsidiaries had 99,290 full-time employees worldwide, compared to 70,757 at the end of 2020. This means that Tesla will hire a total of 28,533 employees in 2021, a surge of 40.3% in the number of employees.
Rapid expansion to deal with production capacity problems, and then streamlined administration. After going through the previous production hell, Musk’s “first recruit and then cut” swordsmanship has become perfect.
C
Tesla is not the only new energy car company to lay off employees. Before that, its domestic competitors Ideal and Xiaopeng have begun to optimize the team’s “winter” mode.
According to public data, the employees of Ideal Auto have increased from 4,181 at the end of 2020 to 11,901 at the end of 2021; as of the end of 2021, the number of Xiaopeng Motors employees exceeded 13,900, and the number was still 5,084 at the end of 2020. According to the financial report of Ideal Auto, in 2021, the company’s employee compensation will total 3.48 billion yuan, a year-on-year increase of 237%, and the per capita salary cost will exceed 290,000 yuan.
Compared with Tesla, the expansion of the scale of employees of the two companies is more aggressive, and the rapid expansion has brought about a sharp increase in operating costs, which also paved the way for subsequent layoffs.
Entering 2022, under the double attack of the epidemic and rising raw material prices, the life of car companies will be difficult. In March of this year, Li Xiang, CEO of Ideal Motors, once said: “The cost of batteries has risen outrageously. Most of the brands that have not raised prices are because the increase has not yet been negotiated.”
Cui Dongshu, secretary general of the Passenger Federation, also pointed out: “The impact of the epidemic in Shanghai on the automotive supply side is huge. Shanghai accounts for 10% of the country’s production, and Changchun also accounts for 10%. The two regions together account for more than 20% of the production. However, The secondary impact of their parts and components is relatively large, especially Shanghai is the core distribution center of parts and components, and more than 80% of the parts and components are produced in Shanghai and its surrounding areas. Judging objectively, the impact of the Shanghai epidemic on passenger car sales is 40%. %about.”
Under multiple unfavorable factors, in May of this year, Ideal and Xiaopeng were successively exposed to breaking their contracts with fresh graduates. Now looking back on last year’s “robbing competition” of car companies, it seems like a lifetime.
In September 2021, a number of media reported on the “snatch battle” of new energy car companies. At that time, Xiaopeng Motors offered fresh graduates a pre-tax salary of 12-16k, starting from 13 and up to 15; Weilai The car year-end bonus is between 20,000 and 50,000 yuan, and all employees, including fresh graduates, hold shares.
Li Ming, a prospective freshman majoring in automobiles, told the Alphabet that not only are regular employees, but many car companies even have internship positions this year, which has decreased compared to last year. “And the epidemic situation was relatively stable last year, and now we can’t deliver internships in many places.” Li Ming said.
For Musk, who operates globally, the plate is bigger and there are more to consider. In addition to the common unfavorable factors in the industry such as the epidemic, rising raw material prices, and parts shortages, Musk also has to consider the impact of the situation in Russia and Ukraine.
As a pessimistic boy, Musk often warns about various issues, such as population problems, artificial intelligence and so on. In this layoff email, Musk once again warned of a recession, and the wave of layoffs and pay cuts in all walks of life seems to be constantly validating his remarks.
In these uncertain times, where no one knows what the future holds, one can only hope that Musk’s warnings don’t come true.
This article is reproduced from: http://finance.sina.com.cn/tech/csj/2022-06-04/doc-imizirau6511992.shtml
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