Speculation is running wild in EV and investment circles about the future path of the world’s biggest and most successful electric car maker, after Tesla overnight confirmed that staff numbers have been slashed, while several key executives also announced their departure.
There had been rumours in the market that Tesla was poised to slash 20 per cent of its global workforce of around 140,000, but it turned out to be a still significant 10,000 when CEO Elon Musk sent an email to staff on Monday (US time).
(In Australia, the numbers of Tesla staff is believed to be around 1,000, but there was no immediate confirmation of how the announced job cuts would affect them).
The real drama, however, lies elsewhere. That includes the departure of Drew Baglino, the head of power trains at Tesla and the man credited as the driving force behind its planned Tesla 2, the EV that would finally deliver a $US25,000 Tesla to consumers.
His exit has reinforced speculation that Musk may be about to engineer a dramatic change of course for Tesla, forced out from the auto industry as most people understand it by competition from China, and focusing instead on areas where it considers itself to be a world leader, including autonomous driving, robo-taxis, and energy.
One of the world’s leading auto analysts, Morgan Stanley’s Adam Jonas, has written that Tesla’s business model could be about to “cross the chasm” from car making to AI and robotics.
“Could the abrupt deceleration in EV demand and rise of China competition move Tesla out of the auto industry … and have it re-enter in a different form?” Jonas wrote in a note to investors earlier this week, before the confirmation of the staff cuts.
Tesla remains the major force in the global EV market, and in country’s like Australia it remains utterly dominant with around 60 per cent of the local electric vehicle market.
But while Big Auto in Chicago, particularly Ford and GM, have more or less given up on a rapid transition to EVs and massively downgraded their investment plans, Tesla’s prominence on a global scale is being challenged by Chinese car makers, led by BYD, who are focused on the low cost end of the market.
The big surprise is the departure of Baglino, a prominent voice on Tesla’s regular investor calls and who was seen as key in the development of the Tesla 2.
“Baglino is an absolute gut punch loss in our view as he was instrumental in the Powertrain and Energy initiatives at Tesla and was viewed by many as key to the Model 2 initiative over the next few years,” the Teslarati blog quoted Wedbush’s Dan Ives as saying.
Ives, one of the top rated Tesla analysts along with Jonas, said the news of Baglino’s departure, along with the widely admired head of policy and business development Rohan Patel, was “very unexpected”, and suggested this was one of the key reasons why Tesla shares slumped again on the market.
Analysts such as Jonas have long suggested that Tesla is different to other car makers, despite its landmark manufacturing breakthroughs, and would rely less on margins from selling EVs than the windfall profits it could make from subscriptions, EV charging, AI, Robot-taxis, energy storage, and other add ons.
Tesla in the first quarter of 2024 missed its EV production targets badly, something it blamed on the ramp up of the new Cybertruck, refitting production lines for the refreshed Model 3, and a whole bunch of issues – including strikes, vandalism and environmental protests – at its Berlin gigafactory.
It has announced significant price cuts on its already best-selling Model Y and Model 3 electric cars, ostensibly to prevent a build up of inventory. But there reports of deeper problems afoot, that Musk is not happy with the progress of the much anticipated 4860 battery cell, and other developments.
Musk has already flagged an “AI” day scheduled for August 8, where the market was expected to hear about the big strides made in autonomous driving and the proposed “robo-taxi.” But for now all eyes, and ears, will be focused on the company’s schedule earnings call next week for guidance on which way Musk is going to turn now.
See also: Robotaxi transitions Tesla from a seller of vehicles to a seller of mobility
Giles Parkinson is founder and editor of The Driven, and also edits and founded the Renew Economy and One Step Off The Grid web sites. He has been a journalist for nearly 40 years, is a former business and deputy editor of the Australian Financial Review, and owns a Tesla Model 3.
