Tesla's earnings pressure builds as 'gut-punch' executive departure is confirmed

By Emily Bary

Tesla reports earnings next week in the face of demand challenges and newly confirmed layoffs

Tesla Inc. confirmed large-scale job cuts on Tuesday, as well as the departure of a key executive - moves that add pressure ahead of the company's earnings report next week.

The electric-vehicle maker is undergoing a restructuring that will cut its headcount by more than 10% worldwide, Tesla (TSLA) confirmed in a securities filing on Tuesday morning. The layoffs were first reported by industry publication Electrek and others on Monday.

Read: Tesla reportedly to cut more than 10% of staff in face of profit concerns

The restructuring "will prepare Tesla for our next phase of growth," the filing noted. "We believe it is extremely important to look at every aspect of the company for cost reductions and increasing productivity."

Tesla also disclosed the resignation of Andrew Baglio, an executive who had 18 years of experience with the company, most recently serving as senior vice president of powertrain and energy engineering for more than four years.

"Baglino is an absolute gut punch loss in our view as he was instrumental in the Powertrain and Energy initiatives at Tesla and was viewed by many as key to the Model 2 initiative over the next few years," Wedbush analyst Daniel Ives wrote on Monday afternoon - after Baglio discussed his departure on X, formerly known as Twitter. His exit struck Wall Street as "very unexpected," Ives commented.

Rohan Patel, a policy and business-development executive at Tesla, announced his departure Monday on X as well.

The latest disclosures from Tesla add to the pressures the company faces heading into its earnings report next Tuesday. Tesla has already posted deeply disappointing delivery numbers for the first quarter, and it will need to reassure investors of its footing - at a time when its shares are among the S&P 500's SPX biggest decliners on the year.

Don't miss: Tesla's latest self-driving push? A price cut on its FSD software.

"We need to hear the rationale for the cost cutting, the strategy going forward, product roadmap and an overall vision from Musk," Ives wrote. If not, "many investors might head for the elevators during this Category 5 perfect storm of weak demand Tesla is seeing globally in 2024," he added.

Tesla's demand challenges have translated to margin pressure as the company has moved to cut vehicle prices at various points over the past year in a bid to spur greater interest.

"Musk will need to quickly take the reins back in to regain confidence in the eyes of the Street," Ives wrote. "It all starts with this upcoming conference call next week and laying out the growth strategy for Tesla in China (and globally) to reverse this negative demand trend."

See also: Tesla's 'self-inflicted' woes make this analyst feel more cautious about the stock

-Emily Bary

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04-16-24 0709ET

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