Tesla CEO Elon Musk joins other high power economic players who have reported having a bad feeling about the economy. Musk had circulated via an email to company executives that there is a need to cut about 10% of jobs at the electric carmaker due to a “super bad feeling”
The message, sent on Thursday and titled “pause all hiring worldwide”, came two days after the billionaire told staff that it was time to return to the workplace.
According to its annual SEC filing, Tesla employed almost 100,000 people at the company and its subsidiaries at the end of 2021.
Tesla shares fell nearly 3% in U.S. premarket trade on Friday and its Frankfurt-listed stock was down 3.6% after the Reuters report. U.S. Nasdaq futures turned negative and were trading 0.6% lower.
Musk has warned in recent weeks about the risk of a recession, adding to a growing chorus of warnings from business leaders about same but his email ordering a hiring freeze and staff cuts was the most direct and high-profile message of its kind from the head of an automaker.
So far, demand for Tesla cars and other electric vehicles has remained strong and many of the traditional indicators of a downturn – including increasing dealer inventories and incentives in the United States – have not materialized.
But Tesla has struggled to restart production at its Shanghai factory after Covid-19 lockdowns forced costly outages at the plant.
“Musk’s bad feeling is shared by many people,” said Carsten Brzeski, global head of macroeconomic research at Dutch bank ING.
Musk’s gloomy outlook echoes recent comments from executives including JPMorgan Chase CEO Jamie Dimon and Goldman Sachs President John Waldron.
A “hurricane is right out there down the road coming our way,” Dimon said this week.
Inflation in the United States is hovering at 40-year highs and has caused a jump in the cost of living for Americans, while the Federal Reserve faces the difficult task of dampening demand enough to curb inflation while not causing a recession.
A number of analysts have cut price targets for Tesla recently, forecasting slower deliveries due to Chinese lockdowns and lost output at its Shanghai plant, a hub supplying electric vehicles to China and for export.
China accounted for just over a third of Tesla’s global deliveries in 2021, according to company disclosures and data released on sales there.
Wedbush Securities analyst Daniel Ives said in a tweet it appeared Musk and Tesla were “trying to be ahead of a slower delivery ramp this year and preserve margins ahead of an economic slowdown.”
Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn from sales in Tokyo and engineers at its new Berlin gigafactory to deep learning scientists in Palo Alto. It had scheduled an online hiring event for Shanghai on June 9 on its WeChat channel.
Musk’s demand that staff return to the office has already faced pushback in Germany.
“Everyone at Tesla is required to spend a minimum of 40 hours in the office per week,” Musk wrote in his Tuesday email. “If you don’t show up, we will assume you have resigned.”
Musk has referred to the risk of a recession repeatedly in recent comments.
Remotely addressing a conference in mid-May in Miami Beach, Musk said: “I think we are probably in a recession and that recession will get worse.” He added: “It’ll probably be some tough going for, I don’t know, a year, maybe 12 to 18 months, is usually the amount of time that it takes for a correction to happen.”
In late May, when asked by a Twitter user whether the economy was approaching a recession, Musk said: “Yes, but this is actually a good thing. It has been raining money on fools for too long. Some bankruptcies need to happen.”
