Tesla CEO Elon Musk has a “super bad feeling” about the economy and should cut about 10 percent of jobs at the electric car maker, he said in an email to executives seen by Reuters.
The message, which was sent Thursday and titled “to halt all hiring worldwide,” came two days after the billionaire told staff to return to the workplace or leave, and adds to a growing chorus of warnings from company leaders about the risks of a recession.
By the end of 2021, nearly 100,000 people were employed by Tesla and its subsidiaries, the annual SEC filing found.
Elon Musk tells Tesla staff to return to the office or leave
The company was not immediately available for comment.
Tesla shares fell nearly three percent in pre-market trading in the US on Friday and its Frankfurt-listed stock fell 3.6 percent after the Reuters report. US Nasdaq futures turned negative and were down 0.6 percent.
Musk has warned of the risks of a recession in recent weeks, but his email ordering a layoff and downsizing was the most direct and high-profile message of its kind from the head of an automaker.
So far, demand for Tesla cars and other electric vehicles (EV) has remained strong, and many traditional indicators of downturn — including increasing dealer inventories and incentives in the United States — have failed to materialize.
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But Tesla has struggled to restart production at its Shanghai factory after COVID-19 lockdowns led to costly outages.
“Musk’s bad feeling is shared by many people,” said Carsten Brzeski, head of macroeconomic research at the Dutch bank ING. “But we’re not talking about a global recession. Towards the end of the year we expect a cooling of the global economy. The US will cool down, while China and Europe will not recover.”
Musk’s bleak outlook mirrors recent comments from executives, including Jamie Dimon, CEO of JPMorgan Chase & Co and John Waldron, president of Goldman Sachs.
A “hurricane is right there on the road heading our way,” Dimon said this week.
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Inflation in the United States is hovering at its highest point in 40 years and has led to a rise in the cost of living for Americans, as the Federal Reserve faces the difficult task of dampening demand enough to curb inflation without a cause a recession.
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Musk, the world’s richest man according to Forbes, did not elaborate on the reasons for his “super bad feeling” about the economic outlook in Reuters’ brief email.
It was also not immediately clear what implications Musk’s opinion would have for his $44 billion bid on Twitter.
Several analysts have recently lowered price targets for Tesla and predicted a loss of production at the factory in Shanghai, a hub that supplies electric vehicles to China and for export.
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China accounted for just over a third of Tesla’s global deliveries in 2021, according to the company’s disclosures and data on sales there. On Thursday, Daiwa Capital Markets estimated that Tesla had about 32,000 orders pending delivery in China, compared with 600,000 vehicles for BYD, its larger EV rival in that market.
Wedbush Securities analyst Daniel Ives said in a tweet that it appeared Musk and Tesla “tried to get ahead of slower delivery times this year and preserve margins for an economic slowdown.”
Before Musk’s warning, Tesla had about 5,000 job openings on LinkedIn, from sales in Tokyo and engineers in its new Berlin gigafactory to deep learning scientists in Palo Alto. It had scheduled an online recruitment event for Shanghai on June 9 on its WeChat channel.
Musk’s demand for staff to return to the office has already faced backlash in Germany. And his job cut plan would meet resistance in the Netherlands, where Tesla is headquartered in Europe, a union leader said.
“You can’t just fire Dutch workers,” says FNV union spokesman Hans Walthie, adding that Tesla must negotiate conditions for departure with a works council.
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In an email from Tuesday, Musk had said Tesla employees should be in the office at least 40 hours a week and shut the door to any remote work. “If you don’t show up, we’ll assume you’ve resigned,” he said.
Musk has repeatedly pointed to the risk of a recession in recent comments.
At a mid-May conference in Miami Beach, he said, “I think we’re probably in a recession and that recession is going to get worse.”
When asked on Twitter at the end of May if a recession was imminent, Musk said: “Yeah, but this is actually a good thing. It’s been raining money on fools for too long. Some bankruptcies have to happen.”
Other companies have cut jobs or are delaying or pausing hiring amid dwindling demand.
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Last month, Netflix said it had laid off about 150 people, mostly in the United States, and Peloton said in February it would cut 2,800 jobs. Meta Platforms, Uber and other tech companies have slowed down hiring.
In June 2018, Musk said Tesla would cut nine percent of its workforce as the then-loss-making company struggled to ramp up production of Model 3 electric sedans, though data in its SEC filings showed the reductions were more than offset by hiring. of staff at the end of the year.