On April 22nd, Bloomberg reported that Tesla's strategic direction has quietly shifted, with the company's RoboTaxi autonomous taxi project now becoming its top priority, even surpassing the previously highly anticipated development plans for a $25,000 entry-level electric car. Tesla CEO Elon Musk has shown immense attention to this project, closely overseeing everything from the development progress of prototype vehicles to the planning of production capacity.
The elevation of the RoboTaxi project demonstrates a significant strategic adjustment for Tesla in both market and technological development directions. Musk has expressed optimistic expectations for the future potential of autonomous driving technology on multiple occasions, believing it will fundamentally change the current state of the transportation industry.
However, this strategic shift is not without controversy. While the RoboTaxi project is forward-thinking in both technology and concept, the development of the $25,000 electric car is still seen by many as an essential part of Tesla's long-term goals. Within Tesla, this shift in strategic focus has sparked intense discussions and some degree of disagreement, with some executives even choosing to leave as a result.
At Tesla, employees have long adapted to a chaotic work environment, largely due to CEO Musk often setting stringent goals and abruptly changing direction. Musk's occasional emotional fluctuations have been vividly described by biographers as "demon mode."
However, even by Tesla's standards, this year's situation is particularly chaotic. Sales declines, confused product decisions, and ongoing price cuts have led to a more than 40% drop in stock price. In the Chinese electric car market, its once dominant position is being challenged. Additionally, Musk's planned meeting with Indian Prime Minister Narendra Modi, where he expected to announce investments in India, was canceled at the last minute.
Meanwhile, the company's board has been trying to reinstate the enormous $56 billion compensation package for Musk. Previously, the plan was invalidated by a court in January of this year because the judge felt the directors were too accommodating to Musk, almost becoming his "obedient servants."
On Tuesday, Tesla is expected to release a shocking financial report, showing a 40% plunge in operating profit and the first revenue decline in four years. Faced with such a dire situation, Musk has ordered the largest layoffs in the company's history and pinned future hopes on a concept called Robotaxi, an autonomous driving taxi service. However, some familiar with his directives are apprehensive about the reforms the CEO hopes to drive.
Although the concept of autonomous driving taxi services was proposed eight years ago, Tesla has yet to establish most of the necessary infrastructure and has not obtained regulatory approval to test such vehicles on public roads. Currently, Musk has postponed plans for a $25,000 entry-level electric car, despite many Tesla investors and some insiders actively pushing for the development of this car, seeing it as crucial to Tesla's future.
Following media reports of this strategic shift, key executives, including Drew Baglino, head of powertrain engineering and energy operations, have resigned. Baglino had been with Tesla for 18 years.
At 52, Musk has led Tesla out of predicaments on multiple occasions. However, Tesla's market value has now dropped to $469 billion, although this is still more than nine times the market value of General Motors or Ford Motor Company. After evaporating nearly $350 billion in market value in just four months, employees, investors, and analysts are all skeptical of the company's strategy.
Deutsche Bank analyst Emmanuel Rosner pointed out last week, "Tesla's shareholder base might undergo a rather painful transition, as investors who were originally focused on the company's electric vehicle sales and cost advantages might choose to exit." Consequently, he downgraded Tesla's stock rating from "buy" and slashed its target price for the next 12 months by over a third.
Musk has stated on social media that recent actions signify Tesla has entered wartime CEO mode. In an email sent to all employees, he announced that Tesla will implement large-scale layoffs globally, with a layoff rate exceeding 10%, meaning at least 14,000 employees will be affected.
According to sources, the actual scale of Tesla's layoffs may be even larger than officially announced, possibly exceeding 20,000 people. Musk's explanation for this is that due to a 20% drop in car deliveries from the fourth quarter to the first quarter, the company also needs to correspondingly cut 20% of its workforce.
For those Tesla employees who survive this layoff storm, they are facing a fundamental shift in the company's development direction. Musk made it clear last week that Tesla will "go crazy for autonomous driving." According to sources, the autonomous driving taxi project is now placed at the highest priority, surpassing not only the prototype vehicle development schedule mentioned by Musk four years ago but also the arrangement of production capacity.
For years, Musk has been enthusiastic about autonomous driving technology and has successfully convinced customers to pay hefty fees for Tesla's "full self-driving" (FSD) product. However, the name of this product is somewhat misleading, as FSD still requires continuous driver monitoring and cannot achieve true autonomous driving. Nevertheless, Musk has repeatedly predicted that this technology will soon reach the standard of autonomous driving. Today, Musk and his top engineering team are eagerly anticipating a significant shift in how FSD operates. Tesla is poised to make unprecedented progress by using video captured by cameras installed around the vehicle to guide driving, rather than relying solely on software code. Ashok Elluswamy, head of Tesla's autonomous driving project, wrote on X website last month that this innovation will bring "unprecedented progress".
However, the optimism surrounding FSD and Musk's steadfast belief in the potential of this new approach for an autonomous taxi project cast a shadow over the future of Tesla's $25,000 car project. Some insiders have disputed claims that Tesla has completely scrapped the project. The company has long been striving to develop a low-cost vehicle architecture that would support various types of vehicles, including one without a steering wheel or pedals.
While several insiders confirm that the autonomous taxi has become a priority project for Tesla, one insider provided a deeper insight into the next-generation car project. They stated that the core goal of this project is to reduce the cost of components and production methods, then apply these innovations to cheaper versions of Tesla's two most popular electric cars—the Model Y and a cheaper version of the Model 3. The team is particularly focused on integrating these cost-saving measures with the globally top-selling Model Y.
Yet, it remains unclear whether these measures will provide sufficient reassurance to investors. Reports suggest that Tesla appears to have abandoned plans to compete with economy models like the Toyota Corolla. This has raised concerns for many, as the only new model Tesla has offered to consumers in the five years since the debut of the Model Y seems to be the expensive and difficult-to-produce electric pickup truck, CyberTruck. Last week, Tesla even recalled nearly 3,900 CyberTrucks to address issues with the accelerator pedal.
Bloomberg Intelligence analyst Steve Mann commented, "Investors, especially institutional investors, are gradually losing patience. The initial hype surrounding fully autonomous driving and autonomous taxi has faded, and the market sentiment seems to be shifting in the opposite direction."
Tesla's positioning shift in the autonomous taxi field undoubtedly carries risks. While federal agencies have taken a relatively lenient regulatory stance towards technologies that could enhance road safety, scrutiny at the state and local levels in the US often proves unpredictable and challenging to navigate.
Take Uber, for example. Former Arizona Governor Doug Ducey warmly welcomed Uber's autonomous vehicles into the state in 2016, but after a fatal collision involving a pedestrian in 2018, the state immediately banned the operation of these vehicles. Two years later, Uber even had to sell its autonomous car division.
Recently, General Motors' Cruise has faced similar challenges. Over the past six months, the company has been working to resume testing of its autonomous taxis after one of its vehicles was involved in an accident in San Francisco where it collided with a pedestrian and dragged them. Additionally, California has halted Alphabet's Waymo, Google's parent company, from expanding its plans following several accidents, including one where a vehicle hit a cyclist.
However, Musk remains confident that Tesla can realize the vision of autonomous taxis by exposing more consumers to and reducing the price of FSD. To promote this feature, he's actively pushing test drives and a 30-day free trial, aimed at increasing revenue while gathering more camera data.
Tesla is building data centers in Buffalo, New York, and its headquarters in Austin to process the vast amount of video data captured by vehicles for training the autonomous driving system. According to insiders, the project in Buffalo is progressing well, while the one in Austin is grappling with cost overruns.
A person directly involved in the layoff process revealed that Tesla's true motivation for layoffs is not merely to save expenses in certain departments but to allocate more resources to the development of autonomous taxis. In this round of layoffs, Tesla's various teams, including those dedicated to autonomous driving technology, were set the same layoff target.
Based on interviews with dozens of affected employees across the US, the organization and execution of this round of layoffs appear quite chaotic. Layoff notification emails starting with "Dear Employee" were sent to personal inboxes after midnight. At Tesla's battery factory in Nevada, many employees began their day in a Monday morning traffic jam, only to be directed to a parking lot where security scanned their badges to determine who was still employed and who had been let go. One employee who learned they were being let go this way described it as the coldest and most humiliating experience of their career.
Former service manager Jordana Hernandez from Virginia wrote on the professional networking site LinkedIn, "Many people suddenly found themselves out of a job during shift changes or only learned of this cruel reality after arriving for work. People thought it was just another regular Monday, but this was the most heart-wrenching part. We have put in tremendous effort and sacrifice for Tesla, but the company has shown chilling indifference. We have given blood, sweat, and tears to Tesla, only to receive such treatment."
Just the Saturday night before the layoff storm began, Musk had struck exaggerated poses on the red carpet, humorously speculating about who should play him in the upcoming biopic about him. A few days later, Tesla Chairman Robyn Denholm expressed dissatisfaction with a Delaware court's rejection of the board's compensation plan for Musk and called for shareholders to reapprove the plan. Around this time, Musk became aware that the severance packages offered to recently laid-off employees at Tesla were significantly low.
In an email to the remaining Tesla employees, Musk wrote, "I only just became aware today that some employees' severance packages were too low. I apologize deeply for this oversight. It is being corrected."
