Tesla management told employees Monday that the recent layoffs — which gutted some departments by 20% and even hit high performers — were largely due to poor financial performance, a source familiar with the matter told TechCrunch.

The layoffs were announced to staff just a week before Tesla is scheduled to report its first-quarter earnings. The move comes as Tesla has seen its profit margin narrow over the past several quarters, the result of an EV price war that has persisted for at least a year. The company delivered a record 1.81 million vehicles in 2023. Its margins, however, took a hit after Tesla repeatedly slashed prices in a bid to drum up sales and undercut the competition.

Tesla informed employees that more than 10%, or about 14,000 workers, will be laid off across the global organization that has operations in the United States, Europe and China. The layoffs, which affected employees across all departments and seniority levels, were made to reduce costs and increase productivity to prepare for its “next phase of growth,” according to an internal email from CEO Elon Musk that TechCrunch has viewed.

High performers also cut

Many of the laid-off employees were high performers, according to two sources who spoke to TechCrunch on condition of anonymity. One source expressed shock at the number of talented employees cut and noted that many of those affected were working on projects that have fallen lower on Tesla’s priority list. The source declined to specify which projects.

Some departments saw layoffs beyond the 10% outlined in the companywide email, according to sources. One manager told TechCrunch that 20% of their employees were cut.

“I lost 20% of my team, some really good players too,” they said.

The shakeup also comes as Musk continues to bend the company’s trajectory toward building fully self-driving cars. Tesla recently dropped plans to build a lower-cost EV that would retail starting at around $25,000, opting instead to use the underlying platform being developed to power an alleged robotaxi that Musk said will debut August 8.

Musk previously tried to prioritize the dedicated robotaxi vehicle project, according to his biographer, Walter Isaacson. In 2022, he told employees that he wanted a “clean robotaxi” with no steering wheel or pedals. Tesla lead designer Franz von Holzhausen and engineering VP Lars Moravy kept running the low-cost EV project in secret and eventually convinced him to make both — that is, until last week when it was reported that Musk changed his mind.

Top execs leave

Two high-profile executives — Drew Baglino, Tesla’s SVP of Powertrain and Energy, and Rohan Patel, VP of Public Policy and Business Development — also left the company.

Patel told TechCrunch he decided Sunday evening to leave Tesla because of “[b]ig overall changes” at the company. Patel, who had been engaging regularly with Tesla customers and fans on X in recent months, declined to be specific. He noted in a message that it would be “Better for me not to speculate.” “Tesla is going to be stronger than ever, and change is good,” he added.

Baglino told TechCrunch that after 18 years it was time to leave Tesla. “I feel good about the impact I’ve been able to achieve, my leadership team is strong, the energy businesses I’m responsible for are doing well, etc.,” he wrote in a message to TechCrunch.

“Baglino was in charge of powerdrives and new battery projects, and there’s a sense that there isn’t a whole lot of innovation that’s sustainable at this point, which is probably why Baglino is leaving,” Sandeep Rao, head of research at London-based financial services company Leverage Shares, theorized in an interview with TechCrunch.

Baglino’s departure comes just a few months after Tesla’s previous CFO, Zachary Kirkhorn, stepped down. In January, Musk posted on X, formerly Twitter, that he would want to have around 25% voting control of Tesla in order to focus more fully on the company, rather than on his other companies, and help the EV-maker become a leader in AI and robotics.