Tesla Motors, Inc.’s TSLA stock has been weighed down in the last two trading sessions by the news of job cuts in China. The company’s share price fell 1.6% on Mar 9, after the news surfaced. Share price inched down further by 0.3% on Mar 10. Incidentally, the stock has lost 14.4% since the beginning of the year.
While Tesla has accepted that it is restructuring its operations in China, leading to a cutback in employee count, the number of layoffs has not been revealed. A large portion of the cutback has already been completed. The company said that it is removing certain positions and adding new ones.
The Chinese newspaper that broke the story reported that 30% of Tesla’s 600 employees in the nation will be handed the pink slip. This means around 180 employees will lose their jobs. The largest axe will fall on the sales department, which will lose nearly half its employees, per the newspaper. Many workers in marketing, public relations and administrative offices will also lose their jobs.
The weaker-than-expected sales in China last year is being blamed for the cutback. Tesla had targeted sales of 5,000 units in the nation in 2014 but managed to sell only 2,500 units as people were worried about the charging of electric cars. China does not have a well-developed charging infrastructure for electric cars, leading to range concerns.
China is an important market for Tesla as apart from being the world’s largest automobile market, it also offers significant opportunities for electric cars due to its pollution issues. Moreover, Tesla has invested significantly in the nation. The company currently has nine stores and charging stations in the nation with three more set to open soon. Further, it has partnered with China Unicom and Soho China Ltd. to build charging stations in China.
Tesla currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Superior Industries International, Inc. SUP, Tata Motors Limited TTM and Wabash National Corp. WNC, all sporting a Zacks Rank #1 (Strong Buy).
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