Tesla Announces Job Cuts Amid Challenges in the Auto Industry

Electric car manufacturer Tesla is set to reduce its workforce, and experts worry that other automakers may follow suit. Frank Schwope, an automotive expert, predicts that other car manufacturers will also cut jobs following Tesla’s announcement. “The job cuts, which auto suppliers decided on months ago, are now being implemented by Tesla. Other car manufacturers are likely to follow,” Schwope told the German Press Agency.

The year 2024 is seen as a “slump” year for electromobility. Automotive expert Ferdinand Dudenhöffer said, “Tesla is stuck with factories that are inflexible and too large. Their growth model is now breaking down as the market weakens.”

Intense Competition from China
The U.S. manufacturer plans to cut more than ten percent of its global workforce due to a downturn in electric vehicle sales. The impact of this decision by CEO Elon Musk on Tesla’s only European factory in Grünheide near Berlin remains unclear.

Tesla is feeling the effects of intense price competition in China, the largest car market, where it delivered nearly 387,000 vehicles worldwide in the first quarter, surprisingly fewer than the previous year. In Germany, the impact is compounded by the elimination of purchase premiums for electric cars, affecting battery car sales.

No Prolonged Crisis Expected for Electric Cars
” For an American company, a 10 percent workforce reduction during economic downturns is not surprising, as hire-and-fire practices occur much faster there,” Schwope noted, reflecting on Tesla. He serves as a lecturer in Automotive Economics at the Hannover University of Applied Sciences.

Schwope does not foresee a prolonged crisis for Tesla in Europe. “However, 2024 is expected to be a downturn year for electromobility.” He anticipates that 2025 will bring growth due to stricter emissions regulations then in effect.

Auto Industry Needs More Certainty
Electric vehicle manufacturers need planning certainty and not a “hot and cold” approach in politics. “Sudden changes in subsidy conditions are disastrous,” Schwope emphasized. Such changes unsettle consumers. He argues that subsidies for electric cars are unnecessary for manufacturers, who have been highly profitable in recent years.

Last year, the world’s largest automotive corporations set records in revenue and profits. Tesla experienced the most significant decline in average EBIT margin, which measures operating profit relative to revenue.

Political Responsibility for Sales Downturn
Dudenhöffer attributes the sales downturn of electric vehicles to policies in Berlin and Brussels. “Politics has damaged utilization by questioning electromobility,” he remarked, also citing the abrupt end to the environmental premium subsidy for private individuals.