Elon Musk explains Tesla strategy behind layoffs as executives depart

Tesla CEO Elon Musk said the company has to “reorganize and streamline the company for the next phase of growth” every five years after at least 10 percent of its global workforce was trimmed, and two key executives left the automaker on Monday.

Tesla has been preparing to enter a new phase of growth within its automotive business as competition increases and it realizes a critical need to update its product portfolio.

Although the Model 3 was recently refreshed and the Cybertruck was first delivered less than six months ago, Tesla is preparing to launch a new, next-generation vehicle platform, which will enable its next growth stage.

Scheduled to begin in the second half of 2025, the next-generation platform will be what the Robotaxi and rumored $25,000 vehicle will sit upon.

However, it is not going to come without turbulence and challenge. Tesla told investors earlier this year it would experience “notably lower” growth rates in 2024 and early 2025 as it focuses on the new platform.

This morning, the challenges for Tesla continued as it announced it laid off around 10 percent of its workforce. Then, Senior Vice President of Powertrain Drew Baglino and Vice President of Public Policy and Business Development Rohan Patel announced their departures from Tesla.

Layoffs and Executive Departures

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk said in an email to employees.

“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done,” he continued.

The email details the reason for the layoffs being an enabler to getting “lean, innovative, and hungry” in preparation for the next growth phase.

However, the trimming of employees went further than lower level associates. Baglino and Patel, who have been with Tesla for 18 and 8 years, respectively, also announced they were leaving the company.

It remains unclear as to what Baglino and Patel’s reason for leaving was at this point. Both said they plan to take time off and be with family.

‘Reorganize and streamline’

Musk explained in a communication on X that Tesla’s decision to trim the excess at the company comes from a need to “reorganize and streamline” every five years.

As Tesla prepares for the next growth phase, the name of the game is cost reductions and increases in productivity.

Layoffs are an unfortunate part of this process, and somewhere between 10 and 20 percent of Tesla’s global workforce was eliminated.

I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

Joey Klender: Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his time at TESLARATI, Joey has broken several big stories, including the first images of the Tesla Model S Plaid, the imminent release of the 4680 Model Y through EPA certification, and several expansions to the Lucid AMP-1 factory in Arizona, to name a few. His stories have been featured in several publications, including Yahoo! Finance, Fox News, CNET, and Seeking Alpha. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on Twitter @KlenderJoey.
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