'For Tesla, a lot of it is around China' - analyst Ives on Musk’s 'super bad feeling' about the economy

Record ID: 1675392

  • Title: 'For Tesla, a lot of it is around China' - analyst Ives on Musk’s 'super bad feeling' about the economy
  • Date: 3rd June 2022
  • Summary: SHANGHAI, CHINA (FILE - JANUARY 7, 2020) (Reuters) TESLA CEO ELON MUSK WALKING ONTO STAGE AND DANCING VARIOUS OF MUSK DANCING ON STAGE
  • Embargoed: 17th June 2022 18:31
  • Keywords: China Economy Jobs Musk Recession Tesla
  • Location: VARIOUS
  • City: VARIOUS
  • Country: USA
  • Topics: Company News Markets,Economic Events,United States
  • Reuters ID: LVA003258903062022RP1
  • Aspect Ratio: 16:9
  • Story Text: Tesla CEO Elon Musk has a "super bad feeling" about the economy and needs to cut about 10% of jobs at the electric carmaker, he said in an email to executives seen by Reuters.
    The message, sent on Thursday (June 2), and titled "pause all hiring worldwide", came two days after the billionaire told staff to return to the workplace or leave, and adds to a growing chorus of warnings from business leaders about the risks of recession.
    In another email to employees on Friday (June 3), Musk said Tesla will be reducing salaried headcount by 10%, as Tesla has become "overstaffed in many areas." But "hourly headcount will increase," he said.
    "Note, this does not apply to anyone actually building cars, battery packs or installing solar," Musk wrote in the email seen by Reuters.
    Almost 100,000 people were employed at Tesla and its subsidiaries at the end of 2021, its annual SEC filing showed. It did not break down numbers of salaried and hourly workers.
    The company was not immediately available for comment.
    Musk has warned in recent weeks about the risks of recession, 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 (EV) has remained strong and many 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.
    " I think what you're seeing is an economy that soften, but also for Tesla, a lot of it is around China. That's a significant part of demand as well as production. Zero-COVID has been brutal, and I think we're going to see a soft quarter for Tesla," said Daniel Ives, managing director at Wedbush Securities.
    Many carmakers achieved record profits in 2021, but the economic situation is now more uncertain, he noted.
    Musk's gloomy outlook echoes recent comments from executives including JPMorgan Chase & Co 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.
    (Production: Kyoko Gasha)
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