Tesla’s Massive Layoffs Will Lead to Savings of Around Half a Billion Dollars

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Tesla appears to have abandoned its go-to strategy to juice demand by instituting margin-destroying price cuts and, instead, now seems bent on pairing cost-cutting measures with those that enhance its ancillary revenue streams.

To wit, Electrek reported on Sunday that Tesla is now slashing its global headcount by over 10 percent this week. Based on a global workforce count of around 140,000 in 2023, Tesla’s latest layoffs amount to around 15,000 employees.

Concurrently, it appears that at least two executives have chosen to part with Tesla in light of these layoffs, including the EV giant’s SVP of Powertrain and Energy, Drew Baglino.

The Impact of Tesla’s Layoffs and FSD Rate Increase

Tesla’s median non-CEO salary in 2023 amounted to around $34,000. Assuming 15,000 employees are laid off, Tesla can reasonably eke out annual savings of around $500 million, corresponding to an impact of $0.11 on the EV giant’s expected 2024 EPS of $2.80.

Yet, there is more. Elon Musk is also mulling decreasing Tesla’s FSD monthly subscription price to increase its uptake rate. This measure, should it win approval, is expected to contribute positively to Tesla’s under-pressure margins.

Challenges Abound

Despite the incrementally positive nature of these developments, Tesla’s challenges remain substantial.

The company has halted Cybertruck deliveries for a week to tackle an accelerator pedal issue. Tesla eventually aims to produce 250,000 units of the Cybertruck annually.

Moreover, Tesla’s inventory count keeps increasing amid persistent demand-related headwinds. We recently estimated that for Q1 2024, the company’s Days of FG Inventory (also known as the Days of Supply metric) has increased to 27.82, based on an overall inventory level of 143,462 units and an average daily delivery rate of 5,157.47.

Finally, investors remain attuned to the drama surrounding Tesla’s Model 2 and the robotaxi. As a refresher, Reuters published a highly contentious report in early April, noting the EV giant’s apparent willingness to abandon its upcoming cheaper Model 2 in the face of serious competition from China. While Elon Musk quickly clamped down on the veracity of Reuters’ reporting, this has not stopped educated conjecture as to the fate of the $30,000 Model 2. The same day, in an apparent attempt to halt Tesla’s share price slide, Musk announced that the EV giant’s much-delayed robotaxi will be unveiled on the 08th of August, 2024, with the vehicle expected to leverage the same platform as that of the Model 2. Yet, there appears to be a growing chorus on Wall Street that the robotaxi is a 2030 story that lacks any immediate financial implications.

Tesla shares are down around 3 percent at the time of writing. Year to date, the stock is now down 33 percent.

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