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Elon Musk Confirms Tesla Layoffs Despite Lawsuit

tesla

Tesla’s CEO Elon Musk has confirmed that the company is laying off employees and around 3.5% of its workforce would be impacted by the decision. Tesla is also facing a lawsuit in the US over mass layoffs.

Tesla and its CEO Elon Musk have been in news since April when the world’s richest person offered to buy Twitter. Musk is now having second thoughts and has put the deal on hold. Of late, Musk has been in the news for his political comments, where has been warming up to Republicans. Also, his comments on the US economy about which he reportedly has “super bad feelings” and Tesla’s layoffs have been keeping his fans busy.

Elon Musk confirms Tesla layoffs

Musk has confirmed that Tesla would be laying off 10% of its total salaried workforce. He clarified that the layoffs would impact 3.5% of the workers and the actual number was not “super material.” He also said that “A year from now, I think our headcount will be higher in both salaried and obviously in hourly.”

Musk also tried to play down the lawsuit and said “That is a small lawsuit of minor consequence.” Musk added. “Anything that relates to Tesla gets big headlines, whether it is a bicycle accident or something much more serious.” Musk is also facing a lawsuit over his pumping of dogecoin.

Leaked internal email

In an internal email, Musk had said “Tesla will be reducing salaried headcount by 10% as we have become overstaffed in many areas. Note this does not apply to anyone actually building cars, battery packs, or installing solar. Hourly headcount will increase.”

Notably, Tesla’s employee policies have always been under a scanner. Unlike Detroit automakers, Tesla does not have a union. While Musk has said that he is not against unions, the company has allegedly acted against workers trying to unionize. Also, the company has been accused of racial and gender discrimination. While Musk has claimed to be a “socialist” the company’s employee policies don’t reflect those credentials. Most recently, he had warned Tesla employees to return to the office or else lose their jobs.

Musk has turned into a “free speech absolutist”

While acquiring Tesla Musk called himself a “free speech absolutist.” He has also warmed up to Republicans and said he would not vote for a Democrat in the 2024 elections. Musk has also offered to restore former President Donald Trump’s Twitter account but the latter is not keen. Trump is instead building his own social media company Truth Social. The company is going public through a SPAC reverse merger.

Tesla gave guidance to sell 1.5 million cars in 2022

Musk hasn’t had a good relationship with US President Joe Biden. While Biden invited automakers like Ford and General Motors to the White House to discuss ways to increase EV (electric vehicle) production in the US, Tesla was left out. This did not go well with Musk as Tesla is the largest EV producer in the US by a fairly large margin.

The company is also the largest EV company globally and sold almost a million cars last year. In 2022, Tesla expects to sell 1.5 million cars. However, markets would be watching the company’s commentary on the guidance in the Q2 2022 earnings call as its production was negatively impacted in the current quarter due to lockdowns in China.

Musk on the Twitter acquisition

Musk has also been in the news for his flip-flops on buying Twitter. After aggressively pushing the deal despite Twitter board’s initial reluctance, Musk has now put his deal to buy the company at $54.20 per share on hold citing fake accounts on the microblogging site. It is widely believed that Musk is trying to renegotiate a better deal considering the fall in tech shares this year.

Analysts on Tesla stock

Some of the Wall Street analysts have turned bearish on Tesla stock amid the drama over Musk’s acquisition of Twitter. Analysts have also been downwardly revising the company’s delivery forecast for the current quarter. Meanwhile, Morgan Stanley believes that the concerns are overblown.

It said, “But as Tesla has shown throughout its history, it can make up substantial lost ground with accelerated deliveries into the close of a quarter where disproportionate amounts of a full quarter’s production can occur in the final week or two. Additionally, what may be lost in 2Q could just provide pent-up sequential tailwinds for 3Q results.”

Cathie Wood of ARK Invest and Gene Munster are also among the prominent Tesla bulls. However, many analysts see the stock as grossly overvalued. Ashwath Damodaran, popularly known as the dean of valuation, also values Tesla at a fraction of its current value.

EV industry

Meanwhile, Bloomberg Intelligence believes that Tesla could lose its EV leadership by 2024 and that Volkswagen would take over. Notably, Volkswagen intends to be the market leader in the EV industry by 2025. Musk has mocked legacy automakers on several occasions. However, legacy automakers are now trying to put up a good fight. It however remains to be seen if they can take on Tesla with their models.

Tesla stock was trading almost 3% higher in US premarkets today. The Nasdaq was also up 2% as US stock markets try to recoup some of their losses from the last week.

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Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA with finance a major. He has over 15 years of experience in financial markets. He has been writing extensively on global markets for the last eight years and has written over 7,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.