Tesla has informed employees that it will lay off more than 10 percent of its global workforce, according to an internal memo seen by Reuters on Monday, as it grapples with declining sales and an intense price war in the electric vehicle market.

In response to comments on the news on X, Tesla CEO Elon Musk posted: "Every about five years, we need to reorganize and streamline the company for the next phase of growth."

Musk last announced a round of job cuts in 2022, after telling executives that he had a "very bad feeling" about the economy. Tesla never specified how many jobs it would cut in 2022, but its employee count rose from about 100,000 in late 2021 to more than 140,000 in late 2023, according to filings with the Securities and Exchange Commission.

The layoffs on Monday took effect immediately, according to a copy of an email sent to the laid-off employees that was seen by Reuters.

On Monday, Tesla's Vice President Drew Baglino, responsible for battery development, and Rohan Patel, Vice President for public policy and business development, also announced their departures from the company in a post on X.

Baglino was one of four members of Tesla's leadership team listed on the company's investor relations website, which includes CEO Musk, and Musk thanked both executives for their work in response to their remarks on X.

Scott Achechek, CEO of Rex Shares - which manages exchange-traded funds with high exposure to Tesla shares - described the staff cuts as strategic, noting the year-over-year increase in Tesla's total headcount as a sign that the automaker is still in a growth phase.

However, Michael Ashley Schulman, Chief Investment Officer at Running Point Capital Advisors, viewed the departure of senior executives as "the biggest negative signal today" that Tesla's growth was in trouble.

Tesla's shares fell by 2.6 percent in midday trading on Monday, with other electric vehicle manufacturers like Rivian Automotive, Lucid Group, and VinFast Auto also trading down between 2 percent and 7.4 percent.

Musk said in the memo sent to all employees: "As we prepare the company for the next phase of growth, it is extremely important that we look at every aspect of the company to cut costs and increase productivity."

He added, "As part of this effort, we conducted a comprehensive review of the organization and made the difficult decision to reduce our workforce by more than 10% globally."

Reuters obtained an email sent to at least three American employees informing them that their layoffs were effective immediately.

Tesla did not immediately respond to a request for comment.

Wholesale Market

The layoffs come following an exclusive Reuters report on April 5, stating that Tesla had scrapped a long-promised budget vehicle expected to cost $25,000, which investors had relied on to drive broader market growth. Musk had said the car, known as the Model 2, would begin production in late 2025.

Shortly after the story was published, Musk posted the phrase "Reuters is lying" on his social media, without specifying any inaccurate information. He has not commented on the car since then, leaving investors and analysts to speculate about its future.

Reuters also reported on April 5 that Tesla would shift its focus to autonomous taxis built on the same platform as its smaller cars. Musk posted on X that evening: "Tesla Robotaxi will be unveiled on 8/8," without further details.

Tesla may be years away from launching a fully self-driving car with regulatory approval, according to experts in autonomous vehicles and regulatory matters.

Tesla's shares have fallen about 33 percent so far this year, underperforming older automakers like Toyota Motor and General Motors, whose stocks rose 45 percent and nearly 20 percent, respectively, thanks to the slow consumer shift away from traditional internal combustion engine vehicles.

Reuters reported on Monday that major energy company BP also cut more than a tenth of its workforce in its electric vehicle charging business after bets on rapid growth in commercial electric vehicle fleets failed to pay off, highlighting the broader impact of slowing demand for electric cars.

Labor Council

Dirk Schulz, head of the IG Metall union in the region, said that the newly elected labor council representing workers at Tesla's German factory was not informed or consulted about employees before the announcement.

Schulz said: "Management's legal obligation is not only to inform the labor council but also to consult with it on how to secure jobs."

Analysts from Gartner and Hargreaves Lansdown said the cuts were a sign of cost pressures as the automaker invests in new models and artificial intelligence.

Tesla reported this month that its global vehicle deliveries in the first quarter declined for the first time in nearly four years, as price cuts failed to stimulate demand.

The electric vehicle manufacturer has been slow to update its older models, as high interest rates have drained consumer appetite for expensive goods, while competitors in China, the world's largest car market, are rolling out cheaper models.

The company is looking to strengthen its margins, which have been affected by frequent price cuts, especially in China, where it faces strong competition from local rivals including market leader BYD, which briefly surpassed the American company as the largest electric car manufacturer in the fourth quarter, and newcomer Xiaomi.

It is also preparing to begin sales in India, the third-largest car market in the world, this year, producing cars in Germany for export to India and exploring locations for showrooms and service centers in major cities.

Tesla recorded a gross profit margin of 17.6 percent in the fourth quarter, the lowest level in more than four years.

The company had laid off 4% of its workforce in New York in February of last year as part of a performance review cycle and ahead of a unionization campaign by its employees.