EV Slow Down Finally Strikes at the Throne: Tesla to Layoff Thousands

I was going to write about EVs this morning, thanks to digging into the stats on the new Cadillac EV SUV. I still might later. But this news was breaking early, and as it strikes at the apex predator of the sector? I figured I’d check this out first.

Elon Musk has seemingly been nimble enough to dance around many of the problems other manufacturers have been facing since last fall. Have they caught up with him at last?  

In mid-March, I had a post that all the auguries were pointing to a rough ride ahead for electric vehicles.  

…Not my headline, y’all. It’s CNBC’s.

EV euphoria is dead. Automakers are scaling back or delaying their electric vehicle plans

“Dead.” How about that?

The buzz around electric vehicles is wearing off.

For years, the automotive industry has been in a state of EV euphoria. Automakers trotted out optimistic sales forecasts for electric models and announced ambitious targets for EV growth. Wall Street boosted valuations for legacy automakers and startup entrants alike, based in part on their visions for an EV future.

Now the hype is dwindling, and companies are again cheering consumer choice. Automakers from Ford Motor and General Motors to Mercedes-Benz, Volkswagen, Jaguar Land Rover and Aston Martin are scaling back or delaying their electric vehicle plans.

Even U.S. EV leader Tesla, which is estimated to have accounted for 55% of EV sales in the country in 2023, is bracing for what “may be a notably lower” rate of growth, CEO Elon Musk said in late January.

That’s not to say EV sales aren’t going to increase – they are. Sales just aren’t going to keep exploding because they’ve been shoved down our throats. The consumer has spoken.

By last week, the EV sector was being read last rights as “the former next big thing.” 

To the climate cult and government renewable fascists’ consternation, EVs remain a niche market. They appeal mostly to the well-heeled (luxury brands are doing well), are impractical for the majority of Americans (even if they could afford one), and are resented in general for being shoved down our collective throats to begin with.

That is not a recipe for widespread acceptance or success.

EV Sales Growth Slows; Market Leader Tesla Stalls

While annual EV sales continue to grow in the U.S. market, the growth rate has slowed notably. Sales in Q1 rose 2.6% year over year, but fell 15.2% compared to Q4 2023. The increase last quarter was well below the previous two years.

In Q1 2023, EV sales volumes were up 46.4% year over year and 15.5% quarter over quarter. In Q1 2022, EV sales were higher by 81.2% year over year and 20.4% higher than the previous quarter.

…Notably, lower prices have supported EV sales volume in the U.S., particularly for key Tesla models. The average transaction price for a new EV in Q1 was $55,167, a 9.0% decrease compared to Q1 2023 and down 3.8% quarter over quarter. Tesla’s average transaction price was $52,315 in Q1, down roughly 13.5% year over year. However, lower prices did not generate higher volume.

Many automakers have followed Tesla’s lead and slashed prices. Incentive spending on EVs has increased notably in the past year, another sign of slowing demand. Leasing, too, has increased. In Q1, roughly 27% of all EVs were leased, more than double from the year before. With leasing, many buyers can qualify for the full $7,500 incentive the Inflation Reduction Act offers.

One bright spot in Q1: Strong EV sales from luxury makers, suggesting the EV market continues to be luxury-driven. Cadillac achieved a 499.2% year-over-year increase in electric vehicle sales due to robust sales of its Lyriq model. At Mercedes, EV sales were up 66.9%. BMW posted a 62.6% increase in EV sales compared to Q1 2023. At Audi, Q1 EV sales grew 28.8% year over year.

Blistering op-eds are in newspapers everywhere, ripping states for forcing illogical, impractical, and hugely expensive EV mandates on residents.

OPINION: The EV elite are putting thousands of Americans out of work with repeat layoffs

There are times when we all must wonder if Santa Fe is in a different time zone. For example: when it is 2:30 p.m. in Las Cruces, politicians in Santa Fe are still pretending it’s 2021. In the most glaring example, it’s clear the electric vehicle bubble has burst, except the news hasn’t reached Santa Fe.

That would be the only way to rationally explain the state Environmental Improvement Board’s recent decision to continue to force Gov. Michelle Lujan Grisham’s electric vehicle mandate. Putting aside the fact the governor’s mandate disrupts the free market just so she can push her agenda, it also is completely devoid of the reality current taking place.

Last year, less than 8% of all vehicles sold were electric. Supporters hail this result as a threshold moment meant to usher in the future of their glorified golf carts. However, as the first quarter of 2024 came to a close, it looks like electric vehicles may be following the path of laser disks and New Coke.

Rumors swirled early this morning that Tesla, the king of the EVs, was preparing to announce layoffs of as many as 20% of its global workforce—an unthinkable event even a year ago. Clearly, some adjustments were going to have be made. Not only were there production issues (European labor unions, etc) and supply problems beyond Tesla’s control, but the simple fact remains that demand had dropped off.

…The rumors come after Tesla angered some employees with delayed performance reviews and price bumps earlier this year.

They also come after Tesla had quite a disastrous quarter with a year-over-year reduction in deliveries, which came way below even the most pessimistic analyst estimates.

As we noted, Tesla had some good excuses regarding production going down this quarter, which would also affect deliveries and the logistics of getting cars to customers, but it didn’t have a good explanation for adding 46,000 vehicles to its inventory in a single quarter.

The automaker has been consistently adding cars to its inventory over the last year and CEO Elon Musk has been mostly blaming the situation on pricing and high interest rates.

Tesla has been expected to reduce production to adjust for what appears to be clear lower demand.

⚠️BREAKING:

*TESLA ANNOUNCES ITS LARGEST-EVER LAYOFFS, CUTTING 15,000 JOBS, ACCORDING TO AN INTERNAL MEMO$TSLA pic.twitter.com/Q98DdULGvG

— Investing.com (@Investingcom) April 15, 2024

When Tesla made the official announcement this morning, while half the feared number of cuts (the same percentage as Tesla’s 2022 layoff round), Bloomberg still called it a “global retrenchment.”  

That’s pretty gloomy verbiage.

Tesla to Cut Over 10% of Workforce in Global Retrenchment

Tesla Inc. will slash global headcount by more than 10%, Elon Musk wrote in an email to staff, as the carmaker grapples with a slowdown in electric vehicle demand.

The chief executive officer cited duplication of roles and the need to reduce cost as reasons for the cuts in the memo seen by Bloomberg News. If the cuts apply companywide, the dismissal would amount to more than 14,000 employees.

Tesla reported disastrous vehicle deliveries early this month, missing expectations by a wide margin and posting its first quarterly decline in four years. Several analysts are bracing for the EV maker’s sales to potentially shrink for the year, citing slow output of its newest model — the Cybertruck — and a lull in new products until the company starts producing a next-generation vehicle late next year.

In January, Tesla’s CFO said they had to “chase down every penny.”  The mad growth potential for the sector everyone was banking on, reinforced by federal and state governments, just is not there.

…The EV slowdown Tesla has felt of late has been widespread. China’s BYD Co. delivered just 300,114 battery-electric vehicles in the first quarter, down 43% from the final three months of last year, when it briefly pulled ahead as the world’s top EV seller. Manufacturers including Volkswagen AG, General Motors Co. and Ford Motor Co. have delayed, dialed back or altogether scrapped EV projects as consumers balk at still-high prices and a dearth of charging stations.

Tesla doesn’t release Q1 results until April 23, so there are sure to be some blue faces from holding breaths while waiting. At this point, some analysts are questioning if EVs have been a massive “misallocation of resources” across the entire automotive industry.

While spinning the Magic EV Investment 8 Ball, the answers popping into view have not been comforting in the least, leading some to question, “What do we do if no one wants these things?”

Because, at the moment, that’s what it’s looking like across the board.

As this Kiwi Newsradio host explains, until the four main issues with EVs change, nothing will improve their popularity with the buying public.

…But my bet is that was a false economy, given there was always a small, early adopter, greenie-type group who were keen no matter what. The taxpayer just made it cheaper. 

Once you soaked those people up the real world was always going to arrive and arrive it has. 

My best advice to the acolytes is: flag it. Stop looking for excuses. EV’s, for most people, are too expensive, have range anxiety issues and are a pain to charge outside your garage. Lord knows what the secondhand market will do. 

That’s the really big question – will it ever and, if it does, when? 

Until that changes the hype machine that’s driven the story to this point is over. 

In spite of aggressive price reductions and the unmatched reputation for quality Tesla has earned, the flag’s gone up there now, too. This is the flagship company of the entire EV movement.

…It remains unknown which specific teams will be most or least affected by the layoffs – but reports indicate that some Tesla employees had already lost access to their emails and Microsoft Teams accounts by Monday. 

Meanwhile, the company has scrapped plans to produce an inexpensive car, abandoning one of Musk’s longstanding goals to make affordable EVs for the masses.

Tesla had previously laid off 4 per cent of its workforce in New York in February last year as part of a performance review cycle and before a union campaign was to be launched by its employees.

…The EV maker has been slow to refresh its aging models as high interest rates have sapped consumer appetite for big-ticket items, while rivals in China, the world’s largest auto market, are rolling out cheaper models.

The company is looking to shore up its margins, which have been dented by repeated price cuts.

It recorded a gross profit margin of 17.6 per cent in the fourth quarter, the lowest in more than four years.

They aren’t going to make their “inexpensive model” because it’s impossible right now if it was ever truly feasible under optimum conditions.

EVs are shaping up to be one expensive blip.