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Tesla Inc., an esteemed name in the realm of electric vehicles, recently garnered attention through the announcement of severe job cuts. The tech giant is eliminating nearly 7% of its 45,000 full-time employees in a move that has sparked concern among Wall Street investors. Market analysts are voicing concerns that the electric vehicle manufacturer is grappling with a growing demand problem.
The leading producer of electric vehicles has been struggling to maintain a robust pace in product deliveries considering the soaring demand for its technologically advanced vehicles. However, the recent layoff notice appears to stand in contrast to Tesla’s continuous drive for bolstering its workforce figure in the past few years. Specifically, the total workforce strength has increased approximately 30% since the end of 2017, raising questions about the sudden decision.
The cost aspects attached to Tesla’s vehicles have been an integral concern for the car maker for a long time. The sudden job cuts follow directly on the heels of Tesla’s decision to end the customer referral program due to its high expenditures. It is imperative to highlight that these strategic decisions are reflecting chairman Elon Musk’s major focuses – cost-cutting and reducing the price of the everyman’s electric car, the Model 3.
Moreover, Musk’s recent letter to employees unveils additional concerns, portraying the profitability of Tesla as a real challenge. In his words, While we have made great progress, Tesla products are still too expensive for most people. We need to work harder to lower costs and find ways to reach more customers.
The rising investor anxiety is justified through the conspicuous absence of any recovery plan in Musk’s letter. Moreover, the uncertainty around Tesla’s ability to maintain a balance between the production scale and demand for electric cars is only enhancing Wall Street’s worries.
The latest Model 3, which was launched with the tag of being an ‘affordable electric car’, has itself fallen under investment analysts’ scrutiny due to the production cost and pricing issues. Tesla’s struggle to churn out Model 3s at its projected rate also questions its ability to thrive in a market where competition is rising at breakneck speed.
Furthermore, one shouldn’t lose sight of the fact that Tesla’s profitability largely depends on selling pollution credits to other manufacturers, particularly in regions where emissions-cutting laws are stringent. Given the fact that other traditional car manufacturers are increasingly jumping on the electric vehicle bandwagon, this income could potentially dry up, adding to Tesla’s troubles.
On a broader perspective, despite the looming concerns, Tesla’s transformative aspirations cannot be discredited. It was Tesla who brought the electric vehicle from the fringe to the mainstream, revamping the stringent perceptions around EVs. Therefore, although the growing concerns from Wall Street investors put Tesla under a magnifying glass, the company’s ability to revolutionize the car industry withstands the criticism. However, moving forward, it remains to be seen how Tesla navigates these critical challenges and continues its momentum in such a rapidly evolving industry.