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Tesla started to furlough its sales and delivery workforce. It happened a few days after the company announced salary cuts and reductions due to the COVID-19 pandemic.
Managers of electric car company Tesla Inc (NASDAQ: TSLA) told their employees on Friday that the company’s furloughs will show the effect to approximately half of its U.S. sales and delivery staff. Meanwhile, as yesterday and today the markers are closed, let us just note that on April 9, TSLA stock jumped 4.40% to trade at $573. The next trading session will show how the latest decisions by Tesla will affect its stock price.
Just for reminder, on April 8, Tesla told its employees that it is cutting pay and furloughing anyone who isn’t assigned to critical work or cannot work from home. The plans for furloughs at Tesla were revealed in the leaked email from regional human resources head Valerie Capers Workman. The measures will be implemented as of April 13.
The company also noted that all reductions will be in place until the end of the second quarter. Vice Presidents and above will see their pay reduced by 30%, directors and above by 20%, while everyone else will have a 10% reduction in salary. Furthermore, Tesla said that the company hopes to return to normal operations by May 4.
Furloughs at Tesla Came after Closing California Plant
The decision was caused by a global pandemic that has forced CEO Elon Musk’s electric car venture to temporarily halt production at its main U.S. car plant in California. Last month, Tesla announced that it will temporarily halt production at its Bay Area factory in California as of the end of the working day on March 23 over the coronavirus outbreak. A factory in New York will also temporarily cease production. However, both plants will continue with “basic operations.”
The decision comes after Tesla initially decided to keep the Fremont plant open despite a shelter-in-place order in the Bay Area. Authorities said the factory wasn’t an “essential business” and the electric carmaker could have faced a misdemeanor charge had it decided to remain open.
According to the employees, workers in sales and delivery have been furloughed according to their rank and occupation, not on the basis of performance. Those with entry-level roles, or who have lower sales quotas each quarter, are all furloughed together with workers in more senior sales and delivery roles who have been with the company for less than two years.
Fear That Furloughs Could Become Permanent
One employee said they worry that permanent layoffs will follow the furloughs, as a continuation of an effort Tesla began in early 2019 to cut costs and ditch its brick-and-mortar stores. However, they still hope they will be able to return to Tesla after the pandemic is sufficiently contained.
Let’s not forget that few months ago, in a major shift, Tesla announced that it will only sell its vehicles online. The electric carmaker then said it will close most of its stores over the “next few months” and lay off some retail employees. However, by March 2019, Musk seems to retract by saying that “stores with a high visitation rate and that lead to significant sales” would not be closed.
The COVID-19 pandemic has forced auto dealers to try to adopt Tesla’s methods of selling cars online, as much as possible, rather than at dealerships. However, even with that approach, due to coronavirus outbreak and most probable recession, vehicle sales face a huge challenge this year.
According to new estimates from Wood Mackenzie, global EV sales hit 2.2 million in 2019, and that number is expected to drop 43% to 1.3 million by the end of 2020.
Be it as it may, Tesla seems not to worry. The company’s sales figure hit a record high in China in March, with 10,160 vehicles sold.