Cuts Coming At Tesla – Employee Layoffs Loom as Pricing, and Targets Cut

Tesla's (NASDAQ:TSLA) shares are down slightly in the pre-market by 0.68% as the automaker continues to struggle to shift sentiment. Tesla's share price has taken a nose dive from the beginning of the year, down 31.14% but how will a change in price, and recent leaked news of layoffs be received?

Lay Offs Coming To Tesla

Tesla is set to lay off more than 10% of its' global workforce, as cost cutting measures abound. In an internal memo, it has been reported that 14,000 Tesla employees will be laid off, although the teams affected is not yet known.

The leaked email from Elon Musk was quoted as stating “Over the years, we have grown rapidly with multiple factories scaling around the globe. With this rapid growth there has been duplication of roles and job functions in certain areas. 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. As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.”

With an employee number globally sitting at 140,000 this will not have been an easy decision for Tesla to make, but there is clearly a desire to shift sentiment in the wake of disappointing earnings, and deliveries, along with a growing base of competitors.

In a different type of cost cutting measure, Tesla have also reduced their pricing in a bit to enhance adoption of what is seen as important future driver of the business.

Tesla Makes Price Cuts On FSD Subscription

In an attempt to expand its Full Self-Driving (FSD) subscription base, Tesla has cut the price of its innovative driver assistance package in half. The electric vehicle (EV) powerhouse reduced the monthly fee for its FSD package to $99 from the previous rate of $199. This reduction represents a significant shift in Tesla's approach as it drives to accelerate the adoption of its advanced semi-autonomous driving features.

The price cut unfolds in the wake of Tesla insisting that all new vehicle purchasers participate in an FSD demo drive. In addition, the company has incentivised existing owners by offering a one-month free trial of the system, signalling a concerted effort to showcase the capabilities of the technology first-hand.

Tesla's Full Self-Driving suite, which has been pushed through to version 12, boasts enhancements powered by artificial intelligence (AI). However, it is important to clarify that while the system offers a suite of advanced driver-assist features, it does not yet constitute full autonomy. Instead, the current iteration is now dubbed “FSD (Supervised)” by Tesla, underscoring the requirement that a driver remain attentive and prepared to take control at any time. This attentiveness is monitored through sensors embedded in the steering wheel and cabin cameras, an integral part of the system's safety mechanisms.

In a contrasting narrative to the current price drop, Elon Musk had previously indicated that the cost of the FSD package would likely increase as the software edged closer to achieving complete self-driving capabilities, particularly with regulatory bodies' approval.

Despite the complexity and uncertainty in the journey toward full autonomy, Musk's latest strategy seems to be pivoting towards securing a high FSD take rate and building a robust subscription business as an interim goal.

Analysts had recently been on a wave of downgrading their near term price targets for Tesla, and some big decisions have clearly had to be made internally. The immediate pricing of the stock has not shifted markedly in the pre-market, but there will no doubt be plenty of analysts evaluating the implications of the news on their outlook.