Tesla’s Supercharger Layoffs Have a Sinister Backstory
Cost Cutting May Not Benefit Tesla, Google Stocks | Image: Firmbee/Pixabay
Key Takeaways
- Tesla has reduced its charging team from its Supercharger network.
- A new report claims that the vertical was preparing for expansion before the entire team was fired.
- With AI in focus, layoffs seem to be the way to optimize costs as seen with Google.
Tesla raised concerns about its stock price performance after firing its entire Supercharger team instead of expanding the vertical. Just like Google, the auto tech giant is reorganizing and downsizing key teams amid high interest rates.
The US-based investors are anticipated to not take the overhaul well as a recent report claims Musk wanted deeper cuts than what the vertical lead proposed and ended up firing the division staff.
Tesla Restructure With Layoffs
Tesla unexpectedly laid off most of its charging team of approximately 500 employees. The team was reportedly responsible for the development and maintenance of its Supercharger network. The reduction has left many questioning the future strategy and reliability of Tesla’s charging infrastructure, which is vital for its electric vehicles.
A recent Reuters report detailed significant upheaval within Tesla’s electric-vehicle charging division. The day before Elon Musk fired nearly the entire 500-member charging team, in addition to chief Rebecca Tinucci. It came as a surprise as the staff expected plans for vertical expansion. However, Musk was reportedly dissatisfied with Tinucci’s presentation and demanded further layoffs.
According to the report, Elon Musk met with Rebecca Tinucci, the director of Tesla’s electric-vehicle charging division, to discuss cost-cutting measures. Tinucci proposed certain reductions, but Musk demanded deeper cuts despite having let go of 15%-20% of its staff two weeks earlier.
The disruption has impacted Tesla’s Supercharger network, a critical component of its EV success. Despite Musk’s assurances of continued expansion, confusion and delays have ensued. The report cites sources who reveal vendors and contractors are left in limbo after already declining auto sales.
Another report claims that an investment plan of $500m is put out to expand the network despite the layoff. This move suggests that a new team could take over.
Notably, the layoffs coincided with Tesla CEO Elon Musk’s visit to Beijing, emphasizing China’s crucial role in the electric vehicle industry just after a postponed trip to India.
Tesla Focuses on AI, Just Like Google
After the layoffs, Tesla, much like Google, may relocate some of its teams internationally. Due to China’s leading role in electric vehicle sales and battery production, Tesla could gain an operational advantage.
Google has also downsized its workforce by laying off 200 employees from its Core group, CNBC reported previously. The core unit was the technical backbone of the company’s primary services. It reportedly maintained cybersecurity and included key developers of the app platforms.
The move is part of Google’s broader restructuring. The tech giant is reportedly transferring certain roles to lower-cost locations in India and Mexico, aiming to optimize operational efficiency.
Alphabet Inc. CEO Sundar Pichai discussed the recent layoffs and company’s AI roadmap with Bloomberg . Pichai highlighted that AI has been a core focus since 2016, and despite setbacks, he believes Google is still in the early stages of AI development.
The layoffs, including cuts in hardware, engineering, and the Google Assistant team, are reportedly part of efforts to streamline operations and focus on AI initiatives. Previously, Pichai defended the firing of engineers protesting a cloud contract with the Israeli government, citing unacceptable disruption to daily business.
He said, “I view, particularly in this moment with AI, the opportunity we have ahead of us is immense, but it needs a real focus on our mission.”
Market Reactions on Stocks
Despite the cost-cutting measures through relocating primary teams abroad, there are reasons to doubt that stock prices will react favorably to these reorganizations in the medium term. The broader economic context, particularly interest rates, plays a significant role in this.
Firstly, the cost of significant restructuring remains high due to prevailing interest rates. The U.S. Federal Reserve’s decision to maintain steady rates in May reflects ongoing inflationary pressures. This decision suggests a cautious approach to monetary policy, potentially keeping rates stable for some time.
This economic backdrop is crucial as it impacts borrowing costs and shapes investment strategies across the tech sector, which could delay the recovery from any operational cutbacks. High-interest rates can dampen investment enthusiasm and slow down strategic reorganizations.
Secondly, both Alphabet and Tesla saw their stock prices surge following their Q1 earnings reports. Alphabet’s shares rose after its first-ever dividend announcement and a strong earnings report. Similarly, Tesla’s stock recently gained momentum from a strategic agreement with China’s Baidu, despite a subdued sales outlook.
Based on these earnings reports, investors seem less concerned about the companies’ profit margins. However, there might be apprehensions about moving key operations out of the United States, where both companies are listed. Such strategic shifts could raise concerns about long-term operational efficiency and market focus. In turn, this negatively impacts the stock performance in the long run.
Pricing-in the Cost Cutting
Recent layoffs at Tesla mean that they are reshaping their operations to deal with global economic pressures and shifting market demands towards AI.
Despite Musk’s assurances that the network will continue to expand, albeit at a slower pace, the layoffs have raised concerns about Tesla’s operational strategy and reliability. This restructuring comes at a time when the company is focusing on AI, similar to the approach taken by Google, which has also downsized key teams amid high-interest rates.
With Google also resorting to layoffs, timing and purpose pose significant questions about the future resilience and agility of these tech giants outside the US.
