Tesla shares slide after Musk reportedly flags cutting 10% of staff

Tesla shares were down more than 8 per cent on Friday after chief executive Elon Musk was reported to have said the electric vehicle maker would cut 10 per cent of salaried staff and freeze hiring.

Musk said the decision was due to a “super bad feeling” about the economy, according to details of two internal emails reported by Reuters.

The emails, on Thursday and Friday, followed a demand by Musk that Tesla’s salaried workers be in the office at least 40 hours a week or find a different job. He told staff that “remote work is no longer acceptable” and that production “will not happen by phoning it in”.

The command could prompt nearly 10 per cent of Tesla’s office workers to look for work elsewhere, according to one estimate, and was widely seen as a sign that Musk was looking for ways to trim the company’s workforce.

Musk’s first email to Tesla executives, on Thursday, was headed “pause all hiring worldwide”. A follow-up message to all staff on Friday added that the company had become “overstaffed in many areas”, leading to the need for a 10 per cent cut in salaried employees, though the number of hourly paid workers would increase.

The potential cuts follow a hiring boom that has seen Tesla add more than 51,000 workers in the past two years, reaching 99,290 at the end of 2021, as it has opened new plants in Shanghai and Berlin and laid plans for a range of new models. It had 4,150 job postings on its website in the US on Friday.

Asked for his response to Musk’s comment about the economy during a press conference about the latest US jobs report, which showed solid overall gains despite the tight labour market, President Joe Biden pointed out that Ford and Stellantis still planned to hire more workers for their electric vehicle expansion, while Intel planned to hire thousands more. “Lots of luck on his trip to the moon,” Biden quipped.

“Thanks Mr President”, Musk replied on Twitter, pointing to a story about how Nasa had awarded his company SpaceX a $2.9bn contract to land Americans on the moon.

Musk is the latest high-profile business leader to offer a bleak economic outlook as inflation soars and Federal Reserve monetary policy tightening and the war in Ukraine roil markets.

JPMorgan Chase chief executive Jamie Dimon warned on Wednesday of a looming economic “hurricane”. “That hurricane is right out there down the road coming our way,” he said. “We just don’t know if it’s a minor one or Superstorm Sandy . . . And you better brace yourself.” Executives at Bank of America and Goldman Sachs have offered similar views.

Last month Musk said that the US was “probably” already in recession and that it “will get worse”.

“It’ll probably be some tough going for, I don’t know, a year, maybe 12-18 months,” he added.

Despite worries about weakening consumer demand, Tesla’s sales backlog stretches into next year, and Musk told a Financial Times conference last month that the company might even stop taking new orders.

However, Tesla and other automakers have cast doubts on their abilities to reach EV production targets as supply chain disruptions and shortages of raw materials for new batteries could hinder the rollout of electric vehicles despite high and growing demand.

“There are some raw material constraints that we see coming, in lithium production, probably in about three years, and in cathode production,” Musk said at the FT event.