Tesla is laying off more than 10% of its global workforce, according to an internal document seen by Reuters on Monday, as it deals with declining sales and a growing price battle for electric vehicles (EVs).

"About every five years, we need to reorganize and streamline the organization for the next stage of growth," CEO Elon Musk said in a post on X. Two senior leaders, battery development chief Drew Baglino and vice president for public policy Rohan Patel, also announced their departures, prompting a thank you from Musk, though some investors expressed worry.

Musk last announced job layoffs in 2022, after informing executives that he had a "very awful feeling" about the economy. Tesla's (NASDAQ:TSLA) headcount has climbed from over 100,000 in late 2021 to more than 140,000 in late 2023, according to regulatory filings in the United States.

Baglino was a Tesla veteran and one of four members of the company's executive team, including Musk, who were featured on the investor relations website.

Scott Acheychek, CEO of Rex Shares, which manages ETFs with high exposure to Tesla stock, described the headcount reductions as strategic, but Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, saw the senior executives' departures as "the larger negative signal today" that Tesla's growth was in trouble.

Less than a year ago, Tesla's chief financial officer, Zach Kirkhorn, departed, raising questions about succession planning.

Tesla shares fell 5.6% to $161.48 on Monday. Rivian (NASDAQ:RIVN) Automotive, Lucid Group (NASDAQ:LCID), and VinFast Auto (NASDAQ:VFS) all had their stock prices fall by 2.4% to 9.4%.

"As we prepare the firm for its next phase of expansion, it is critical to look at every part of the organization for cost savings and increased efficiency," Musk stated in the note distributed to all employees.

"As part of this effort, we conducted a thorough evaluation of the organization and made the difficult choice to cut our global workforce by more than 10%," it stated.

Reuters discovered an email sent to at least three U.S. employees informing them that their departure was effective immediately.

Tesla did not immediately respond to a request for comment.

The layoffs come after an exclusive Reuters report on April 5 that Tesla had canceled a long-promised low-cost car, anticipated to cost $25,000, which investors had been banking on to spur mass-market expansion. Musk previously stated that the Model 2 would go into production in late 2025.

Shortly after the news was published, Musk commented "Reuters is lying" on his social networking site X, without mentioning any inaccuracies. He has not spoken about the automobile since, leaving investors and analysts to speculate on its destiny.

The tech publication Electrek, which first reported the latest job losses, stated on Monday that the low-cost automobile project had been defunded and that many staff working on it had been laid go.

On April 5, Reuters reported that Tesla would turn its focus to self-driving robotaxis based on the same tiny car chassis. Musk announced on X that evening, "Tesla Robotaxi unveil on 8/8," but had no other information.

According to self-driving car and regulation experts, Tesla could take years to release a fully autonomous vehicle with regulatory permission.

Tesla shares have lost nearly 33% this year, trailing legacy automakers like Toyota Motor (NYSE:TM) and General Motors (NYSE:GM), whose shares have risen 45% and 20%, respectively.

BP (NYSE:BP) has also reduced more than a tenth of its EV charging workforce after a bet on quick growth in commercial EV fleets failed, Reuters reported on Monday, highlighting the larger impact of slowing EV demand.

WORKS COUNCIL

The recently elected works council of labor representatives at Tesla's German facility was neither contacted or consulted prior to the announcement to employees, according to Dirk Schulze, leader of the IG Metall union in the region.

"Management has a legal obligation not only to inform but also to collaborate with the works council on how to secure jobs," Schulze stated.

Analysts at Gartner (NYSE:IT) and Hargreaves Lansdown said the reduction indicated cost pressures as the automaker invests in new vehicles and artificial intelligence.

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

The EV manufacturer has been hesitant to replace its aged models as high borrowing rates have reduced consumer appetite for high-priced things, while competitors in China, the world's largest auto market, are introducing lower-cost models.

In the fourth quarter, China's BYD (SZ:002594) briefly surpassed the United States as the world's largest EV manufacturer, while newcomer Xiaomi (OTC:XIACF) has received a lot of positive attention.

Tesla is preparing to begin sales in India, the world's third-largest auto market, this year, manufacturing cars in Germany for export to India and evaluating locations for showrooms and service centers in major cities.

Tesla's gross profit margin was 17.6% in the fourth quarter, its lowest in more than four years.