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Tesla stock fell on Friday after CEO Elon Musk reportedly said the electric-auto maker would need to cut around 10% of its workforce and regulators stepped up scrutiny over the company following more complaints that its cars were abruptly stopping while in use.
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Musk’s remarks about the job cuts were made in an email to executives, Reuters reported. In the email, reportedly sent Thursday with the title “pause all hiring worldwide,” he said he had a “super bad feeling” about the economy.
It was unclear whether plans for any cutbacks would actually be put in place. Tesla did not immediately respond to a request for comment. The company and its subsidiaries had 99,290 full-time employees as of last year, according to its annual report.
The report from Reuters arrives as China’s zero-Covid policy strains production at Tesla’s factory in Shanghai. Cowen analysts who follow Tesla stock, in a research note on Friday, cut their estimates for second-quarter deliveries to 242,000, from 309,400.
However, as Reuters noted, demand for Tesla’s electric vehicles and those from other manufacturers has held up. And the report noted that other signs of weakening auto demand, like more cars on dealer lots and more incentives, have yet to emerge.
Tesla Stock Falls
Tesla stock slid nearly 9% in the stock market today. Shares were still in a double-bottom base with an 1152.97 buy point.
Along with Musk’s email, the National Highway Traffic Safety Administration on Friday said it was seeking more information from the automaker, after receiving 758 reports of “unexpected brake activation” — often described as “phantom braking” — in some 2021 and 2022 Model 3 and Y vehicles.
The request was dated May 4. Tesla has until June 20 to respond. The agency is asking for, among other things, information on the number of those vehicles Tesla has made in the U.S., and related customer complaints, crash and damage reports, documents and other data.
The NHTSA in February opened a preliminary inquiry into the matter after it received 354 complaints alleging abrupt brake action in the vehicles — particularly when the vehicles’ autopilot features were in use.
“The complaints allege that while utilizing the (advanced driver assistance system) features including adaptive cruise control, the vehicle unexpectedly applies its brakes while driving at highway speeds,” the agency said then.
“Complainants report that the rapid deceleration can occur without warning, at random, and often repeatedly in a single drive cycle.”
Commodity Prices, Other Automakers
Data released early Friday showed the U.S. economy added 390,000 jobs last month. That was above expectations for 325,000, but down from April. The stock market has begun to read strong job numbers as a negative, a signal that the labor market remains overheated, keeping upward pressure on inflation.
The potential job cuts from Tesla come as other companies also ratchet back hiring plans.
“Pausing hiring worldwide was somewhat expected, but eyeing a cut of 10% of staff, which is around 10,000 employees suggests Tesla will struggle to meet its end of year targets,” Edward Moya, market analyst at OANDA, said in an email. “Commodity prices are not easing fast enough, China’s COVID situation will likely linger, and a weaker consumer will hurt demand for new cars.”
“If Tesla is worried about their outlook, that means the other large car manufacturers are in bigger trouble,” he continued.
Wedbush analyst Dan Ives, on Twitter, said Tesla stock investors would likely view Musk’s email negatively. And he said the company aimed to get ahead of a slower delivery rollout this year.
“Street will clearly read this message negatively at first blush; Tesla trying to be ahead of a slower delivery ramp this year and preserve margins ahead of economic slowdown,” he said.
‘Elephant In The Room’
But he said the “elephant in the room” was now Musk’s “radio silence” on his plans to buy social-media platform Twitter (TWTR). “That could be other shoe to drop as Musk navigates current backdrop and bot issue still unresolved in Twitter deal pause.”
Twitter has cleared an antitrust review, according to reports. The $44 billion deal now awaits approval from other regulators and shareholders. Musk last month said the deal was “on hold” as he waited for more details supporting Twitter’s calculation that spam and fake accounts comprised less than 5% of the platform’s users. He said then that he was “still committed” to the acquisition.
Other companies, from Microsoft (MSFT) to cryptocurrency exchange Coinbase (COIN), have also pulled back on hiring as rising prices raise concerns of a recession.
Coinbase on Thursday said it would “extend our hiring pause for both new and backfill roles for the foreseeable future and rescind a number of accepted offers.” The company said it made the decision in response to “current market conditions.”
Microsoft, Bloomberg said, would tap the brakes on hiring in its Windows, Office, Teams and software divisions. Facebook parent Meta (META) also reportedly plans to slow hiring.
Ride-hailing service Lyft (LYFT) also plans a hiring slowdown, the Wall Street Journal reported last month. Uber (UBER) has also reportedly pulled back on some hiring.
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