Tesla Layoff Scandal: Workers Unaware Until Badge Scans Deny Them Entry

Faced with the need for downsizing, Tesla CEO Elon Musk informed his employees of a 10 percent workforce reduction. This axing process would impact nearly 14,000 positions globally.

However, according to five current or former workers who spoke to Business Insider, some individuals arrived at company facilities on Monday unaware they had been laid off.

In a message to staff, Musk acknowledged the hardship, stating, "There is nothing I hate more, but it must be done." The downsizing will enable Tesla to be "lean, innovative and hungry for the next growth phase cycle," Musk noted in a company-wide memo, first reported by Elektrek.

The announcement impacted Tesla's stock price, with shares dropping Monday morning. Notably, Tesla has around 140,000 employees worldwide. During the first quarter, Musk's automotive company reported declining vehicle deliveries.

This drop was the company's first in about four years and also below market expectations. Tesla is gearing up to report its quarterly earnings on April 23. In a press release, the company attributed the fall in deliveries to a drop in EV car demand.

In addition, Tesla blamed its fall in deliveries on the arson attack at its factory near Berlin and supply-chain issues triggered by the Red Sea conflict. The rumour mill began churning out speculations surrounding a looming layoff after the car maker asked managers to identify critical team members, decided to pause some rewards, and cancelled some employees' annual reviews.

Tesla implemented surprise layoffs at a Nevada factory. Unlike usual on-site checks, security scanned worker badges as they exited shuttles. Those laid off were identified and sent back on separate vans. Similar reports came from the Fremont factory, where badge access determined employment status.

Tesla Trims Workforce for 'Next Phase of Growth'

Despite Musk's previous claims of production constraints for the Cybertruck, Tesla has reportedly decided to scale back production shifts at its Texas Gigafactory. This decision reflects a broader trend within the auto industry as automakers adjust to slower-than-anticipated EV adoption worldwide.

BP is downsizing its EV business, laying off more than 10 percent of its workforce in this division. Aside from this, BP also exited a slew of markets after its initial projections for rapid growth in commercial EV fleets failed to materialise, according to company sources.

On the other hand, China's electric vehicle market is expected to be booming, with Musk just last year praising the country's carmakers as being "our toughest competition." Ironically, earlier this year, Musk touted trade barriers as the only factor preventing foreign automakers from dominating the domestic market.

"I think the Chinese car companies are extremely competitive," Musk said in November. "There's a lot of people out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong," he added.

According to a report by The Street.com, the Tesla boss applauded the Chinese work ethic at the time, calling it "incredible" and claiming the country was "super good at manufacturing."

Additionally, the ever-controversial tech mogul said that Tesla considered "the Chinese league to be the most competitive' and added that the firm does 'very well in China because our China team is the best."

In the internal memo sent over the weekend, Musk admitted that Tesla has proliferated with multiple factories worldwide. "With this rapid growth, there has been duplication of roles and job functions in certain areas," Electrek reported, citing Musk's statement.

Musk emphasised the need for cost-cutting measures and improved efficiency in a statement outlining plans for Tesla's future growth. After announcing a challenging but necessary decision to reduce the global workforce by over 10 percent, Musk thanked those who were being let go for their "hard work over the years."

Despite these workforce reductions, Tesla remains committed to innovation. As recently confirmed by Musk, the company is still on track to unveil its Robotaxi in August.