Tesla Chief Executive Elon Musk appeared to recant his words in a tweet response Saturday, stating that the amount of salaried personnel might not change substantially after delivering an email concerning job cutbacks for employees. Musk had sent an email to his staff on Friday stating that the electric car company could slash 10% of its salaried employees and instead, it would depend more on hourly workers.
In a tweet, Musk indicated that the company’s headcount could increase in the coming 12 months. In reply to the tweet, he said that the electric car maker’s total employees could increase, but salaried employees’ numbers could remain flat.
According to Musk, he has a “super bad feeling” about the economy in the email to executives titled “pause all hiring worldwide.” The bearish outlook came days after Musk told employees to return to work or quit, adding to the growing warnings about recession risks.
Tesla shares dropped 9% on Friday following the announcement, while the tech-focused Nasdaq dipped 2%.
Musk stated in the email that they would cut salaried staff by 10% since it has been overstaffed in most areas. Interestingly, the hiring freeze will not apply to employees building battery packs, installing solar, or building cars.
According to its yearly SEC filing, by the end of last year, Tesla had employed almost 100,000 workers. The numbers represent employees at the company and its subsidiaries, but the electric car maker didn’t break down the figures for hourly and salaried workers.
In recent weeks Musk has been warning regarding the risks of recession, but the staff cuts and hiring freeze was a high profile and direct message from the head of the carmaker, as others describe sky-high demand.
Morgan Stanley analyst Adam Jonas said that the Tesla CEO had informed insight into the world economy. In addition, Jonas said that they believe the message from Musk carries high credibility.
When asked on Friday about Musk’s negative economic outlook, President Joe Biden said that as Musk talks of economic concerns and job cuts, Ford, on the other hand, is expanding its investment in electric cars with around 6,000 new union workers. Biden also praised Stellantis, former Chrysler Corp, for its investment in EVs production in the US and Intel Corp for creating 20,000 additional jobs in the computer chip production sector.
Thus far, the market for Teslas and other electric cars has stayed high, and many usual markers of a slowdown, such as rising dealership inventories and discounts in the US, have not occurred.
However, after costly interruptions caused by COVID-19 pandemic lockdowns, Tesla has failed to resume operations at the Shanghai factory.
NordLB analyst in Hanover Frank Schwope said that it’s often preferable to impose austerity actions in good periods rather than bad. Schwope added that the statements, in his opinion, are a forewarning and a preventative measure.
Musk’s pessimistic assessment reflects previous remarks by leaders such as Goldman Sachs President and JPMorgan Chase CEO Jamie Dimon. For example, last week, Dimon said that a hurricane was out there, and it was coming.
Inflation in the US is near 40-year peaks, producing a rise in living costs for Americans. In contrast, the Federal Reserve has the tough task of reducing demand to keep inflation in check without triggering a recession.
Also, it was unclear what, if any, implications Musk’s viewpoint has for his proposed $44 billion acquisition of Twitter. On Friday, antitrust regulators in the United States approved the merger, pushing Twitter’s stock up 2%.
Many analysts have lately lowered their Tesla price targets, citing reduced output at the company’s Shanghai factory, which serves as the hub for EV production in China as well as for export.