Elon Musk, Tesla’s CEO, has a “bad feeling” about the economy and needs to cut about 10% of jobs at the electric car company, he said in an email to executives seen by Reuters.
The message, sent on Thursday and titled “Stop All Hiring Worldwide,” came two days after the billionaire told employees to return to the workplace or resign, and it adds to a growing chorus of warnings from business leaders about recession risks.
Nearly 100,000 people were employed by Tesla and its subsidiaries at the end of 2021, according to its annual report to the SEC.
The company did not immediately respond to requests for comment.
Tesla shares fell nearly 3% in the US premarket on Friday, and Frankfurt-listed stocks dropped 3.6% after the Reuters report. Futures on the US Nasdaq turned negative and traded down 0.6%.
Musk has warned in recent weeks of recession risks, but his email ordering a freeze on hiring and staff cuts was the most direct and high-profile message from an automaker boss.
So far, demand for Tesla cars and other electric vehicles (EVs) has remained strong, and many traditional indicators of a slowdown — including rising inventories and dealer incentives in the United States — have not materialized.
But Tesla has struggled to resume production at its Shanghai factory after Covid-19 lockdowns caused costly shutdowns.
“Musk’s bad sentiment is shared by many people,” said Carsten Brzeski, global head of macroeconomic research at Dutch bank ING. “But we’re not talking about a global recession. We expect the global economy to cool down later in the year. The US will cool off, while China and Europe won’t recover.”
Musk’s bleak outlook echoes recent comments from executives including JPMorgan Chase CEO Jamie Dimon and Goldman Sachs chairman John Waldron.
“There’s a hurricane right up the road, heading our way,” Dimon said this week.
Inflation in the United States is approaching a 40-year peak and has caused the cost of living to jump as the Federal Reserve faces the difficult task of dampening demand enough to contain inflation without causing a recession.
Musk, the world’s richest man according to Forbes magazine, did not detail the reasons for his “bad feeling” about the economic outlook in the brief email seen by Reuters.
It was also not immediately clear what implication, if any, Musk’s opinion would have for his $44 billion bid for Twitter.
Several analysts have lowered price targets for Tesla recently, predicting a drop in production at the factory in Shanghai, the hub that supplies electric vehicles to China and for export.
China accounted for just over a third of Tesla’s global deliveries in 2021, according to company reports and released sales data in the country. On Thursday, Daiwa Capital Markets estimated that Tesla had about 32,000 orders awaiting delivery in China, compared with 600,000 vehicles from BYD, its biggest EV rival in that market.
Wedbush Securities analyst Daniel Ives said in a tweet that it appeared that Musk and Tesla were “trying to get ahead of slower deliveries this year and preserve margins before an economic downturn.”
‘Pause all signings’
Before Musk’s warning, Tesla had about 5,000 jobs on LinkedIn, from salespeople in Tokyo and engineers at its new gigafactory in Berlin to deep learning scientists in Palo Alto, Calif. She had scheduled an online hiring event for Shanghai on June 9 on her WeChat channel.
Musk’s demand that employees return to offices has already caused backlash in Germany. And his plan to cut jobs would face resistance in the Netherlands, where Tesla is based in Europe, a union leader said.
“You can’t just lay off Dutch workers,” said FNV union spokesman Hans Walthie, adding that Tesla would have to negotiate the terms of any layoffs with a works council.
In an email on Tuesday, Musk had said Tesla employees should be in the office a minimum of 40 hours a week, closing off any remote work. “If you don’t show up, let’s assume you resigned,” he said.
Musk has repeatedly referred to the risk of a recession in recent comments.
Speaking remotely at a mid-May conference in Miami Beach, he said, “I think we’re probably in a recession, and this recession is going to get worse.”
In late May, when asked on Twitter if a recession was coming, Musk said: “Yes, but this is actually a good thing. It’s been raining money for fools for a long time. Some bankruptcies need to happen.”
Other companies have cut jobs or are slowing or halting hiring amid weakening demand.
Last month, Netflix said it 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 hiring.
​In June 2018, Musk said Tesla would cut 9% of its workforce as the then loss-making company struggled to sell production of Model 3 electric sedans, although data in its SEC filings show the reductions were more than offset by year-end hires.
John O’Donnell, Ju-min Park and Zoey Zhang collaborated. Translated by Luiz Roberto M. Gonçalves.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
