Tesla posted disappointing production and delivery numbers in the first quarter of 2024, well below Wall Street expectations. The EV maker delivered 386,810 EVs in the quarter, down 20.2% from the prior quarter and 8.5% from a year ago. It produced 433,371 vehicles during the period.

Tesla reported the production and delivery numbers for the first quarter of the year, and it was even worse than predicted. The EV maker missed Wall Street estimates, especially regarding deliveries, pointing to larger inventories than expected. This shows that the aggressive price cuts Tesla operated last year are starting to lose effect as the interest rates continue to stay high and interest in electric vehicles appears to calm down.

Tesla delivered only 386,810 electric vehicles in the three months through March 31, down 20.2% from Q4 2023 and 8.5% from Q1 2023. Wall Street analysts estimated an average of 454,200 vehicles delivered in the first quarter. The last time Tesla posted a decline in quarterly deliveries was in Q2 2020 when the pandemic forced the carmaker to shut down production.

This time, Tesla explained that the volume decline was partially caused by the upgrade works required at the Fremont factory for the updated Model 3. Ramping up production was also more difficult than estimated. Besides that, shipping diversions caused by the Red Sea conflict and the arson attack at Giga Berlin also led to production disruptions.

However, this doesn't explain why Tesla ended the quarter with a large gap between production and deliveries. This amounts to 46,561 vehicles, which means that more than 10% of the EVs Tesla produced in the quarter are still unsold. This shows that the end-of-quarter push didn't work as expected despite Tesla announcing price increases after April 1. The limited demand affected the Model Y the most. Tesla will likely be forced to reverse the price increase to clear inventory.

Although 2023 was a good year for Tesla, 2024 could prove a lot more challenging. The cooling of the EV market in the US and increased competition, especially in China, could put an end to the double-digit growth trend that Tesla enjoyed. The EV maker is well aware of this, as it warned during the Q4 2023 earnings call that it's in between growth waves, with the new one only expected in late 2025. This is when the next-generation compact EVs are expected to start deliveries.

Despite the disappointing results, Tesla remains the largest EV manufacturer in the world. That's because its main rival, BYD, also had a bad quarter, with only 300,114 EVs delivered in the first three months. BYD sold more than 526K EVs in Q4 2023, surpassing Tesla. However, the American carmaker retained the crown for 2023 and continues leading the way into 2024.

Following a disastrous first quarter caused by an EV demand slowdown, Tesla announced massive layoffs. According to an internal memo signed by Elon Musk, this could affect over 10% of the company's global workforce. The news comes after Cybertruck shifts were cut short at Giga Texas last week.
Tesla reported disappointing Q1 2024 production and delivery numbers on April 2, shocking analysts and investors. While the carmaker offered several explanations for the production drop, it couldn't explain why deliveries were so bad. During the quarter, Tesla added more than 46,000 vehicles to its inventory, reaching an all-time high. People expect the financial data planned for release on April 23 to be just as bad. The worst part is that Tesla doesn't yet see a solution to its demand problem.

This was made clear after rumors about massive layoffs started surfacing last week. The rumors claimed that Tesla intended to lay off as much as 20% of its workforce. The number turned out somehow lower, although we don't yet know by how much. On Monday, an internal memo signed by Elon Musk announced that "more than 10%" of Tesla's global workforce will get their last paycheck.

Although Tesla regularly lays off workers, this is the highest number yet, potentially affecting over 15,000 employees worldwide. Tesla laid off 2% of its global headcount in 2017, 9% in 2018, 7% in 2019 and about 3% in 2022. Usually, the company frames the layoffs as a necessary step to keep the organization more efficient by trimming the unnecessary fat. However, this round of layoffs appears to be different, as it comes after a disappointing first quarter.

Earlier this year, Bloomberg reported that Tesla started reviewing its employee performance. Managers were instructed to identify key members of their teams, hinting at potential layoffs. At the same time, people complained that their performance reviews were delayed. Before the layoffs were announced, Tesla slowed production at several factories, including Giga Shanghai, its most efficient production facility.

Although layoffs are not unusual in the corporate world, there is more going on than just business as usual. One of the most surprising moves Tesla made recently was shortening the Cybertruck production shifts at Giga Texas. The Cybertruck was supposed to be production-constrained, with a difficult ramp-up that made it impossible to satisfy the huge demand. However, Tesla notified employees working on the Cybertruck production lines that their shifts would be reduced.

Normally, Cybertruck workers clocked 12-hour shifts from 6 AM to 6 PM and 6 PM to 6 AM. An internal memo obtained by Business Insider shows that Tesla notified workers that, beginning Monday, they would work 11 hours during the day and 10.5 hours during the night. If Tesla Cybertruck is production-constrained, as Elon Musk announced during the Q4 2023 earning call in January, why would Tesla want to produce less?

Tesla has started sending out severance information to laid-off employees.

Tesla CEO Elon Musk told staff the electric-car maker was slashing more than 10% of its workforce on Sunday night, according to an internal memo viewed by Business Insider. In the individual layoff notices to impacted workers that were sent in the hours after Musk's companywide email, Tesla told workers they'd receive their severance information "within 48 hours," according to emails viewed by BI.

The emails, which were sent to the workers' personal email accounts, notified staff they had been terminated effective immediately. The workers were also cut out of Tesla's internal systems around the same time, several former workers said.

The carmaker appears to be offering workers two months of severance — meaning the workers will be paid through June 14, five former workers told Business Insider. The severance packages did not appear to be weighted based on the length of time workers had been with Tesla, as workers with anywhere from a few months to several years of experience at Tesla received the same number of weeks paid out, the five sources told BI.

Under the Worker Adjustment and Retraining Notification Act (WARN), companies that have more than 100 workers are required to provide 60 days of notice before a large-scale layoff. However, Tesla's severance offer could address any potential penalties if it were found to have violated the WARN Act, which says laid-off employees can be entitled to up to 60 days of pay and benefits if not given proper advanced notice.

Tesla is also offering to pay the cost of COBRA health insurance for two months for workers who had coverage through the company, according to a severance package offer viewed by BI.

In order to receive the severance pay, laid-off workers must sign the contract being offered, which prohibits them from participating in any lawsuit or mass arbitration against the company, sharing any of the company's trade secrets or publicly defaming Tesla. These types of clauses are relatively standard for severance agreements.

Tesla said the severance agreement must be signed within five business days of its receipt and workers will receive their severance pay 45 days after their termination date, according to a severance agreement viewed by BI.

While the severance information appears to have started going out overnight, several Tesla workers who were impacted by the layoff told BI they had yet to receive a severance information as of Wednesday morning.

The severance agreement did not include any information regarding equity awards or unused PTO. An exit email that was sent to laid-off employees on Tuesday said Tesla workers had "either 30 days or 3 months (or both)" from their termination date to exercise their vested stock options and staff would have their PTO that they'd accrued leading up to their termination date paid out in their final paycheck.

Tesla to speed up rollout of cheaper electric cars

Tesla cut two key executives and laid off the 500 staff members who supported the operations of its Supercharger EV charging network, The Information reported on Tuesday, citing CEO Elon Musk's email to senior managers.

Musk cited falling sales and impatience with the overall progress in headcount reduction as the primary drivers behind the cuts and reportedly suggested that more will follow, warning his executives to take headcount reduction measures seriously.

Rebecca Tinucci, senior director of the electric vehicle maker's Supercharger business, and Daniel Ho, head of the new vehicles program, are both out. Musk also plans to dismiss everyone working for Tinucci and Ho, including the roughly 500 employees who work in the Supercharger group, the report said. The Supercharger layoffs stand out as particularly surprising, because the Supercharger network is widely regarded as a key advantage for Tesla over its competition — as of January, Tesla had built 6,000 Supercharger stations with nearly 55,000 chargers.

Tesla's public policy team, which was led by former executive Rohan Patel, will also be dissolved.

Per Musk, Tesla needs to remain "absolutely hard core" about managing headcount and costs and said the cuts should serve as a warning to anybody on staff who isn't taking the initiatives seriously. Tesla had 140,473 employees globally as of end-2023, Reuters said.

Ho joined Tesla in 2013 and served as program manager on Model S, the 3, and the Y before being put in charge of all new vehicles. Tinucci joined in 2018. Two other leaders — Patel and battery development chief Drew Baglino — announced their departures earlier this month, when Tesla also ordered the layoffs of more than 10% of its workforce.