Elon Musk signaled to Tesla staffers this week that he’s looking into why the electric vehicle company has 140,000 employees – 31% more workers per dollar of revenue than General Motors.
Tesla is structured differently from GM or Ford. Tesla produces more vehicle parts in house, it has energy and solar units, and it owns its dealer, service and charging networks. Legacy automakers outsourced sales and service to franchised dealers a century ago.
Still – Tesla’s overhead costs (SG&A) were up 24% in the fourth quarter compared to a year earlier. Revenue increased by just 3.5%. And Musk warned that Tesla does not expect significant growth this year.
Those are all leading indicators for a retrenchment – which is part of the cycle for companies that make cars, including Tesla, which likes to present itself as a technology company.
Speaking of technology companies, they are laying off staff by the thousands as they reassess the wisdom of pandemic-era hiring sprees.
Legacy automakers are squeezing budgets too. The EV capital investment and technology arms race of the past five years has given way to more sober assessments of how much “innovation” mainstream consumers are willing or able to buy.
Ford, for example, dug into the data streaming from connected vehicles and discovered that almost nobody was using an automated parking system that helped execute a parallel parking maneuver. That feature is now off the menu, saving $60 per vehicle – which rolls up to $10 million a year, Ford COO Kumar Galhotra told analysts.
A bigger austerity driver for Ford and GM are demands from investors that the Detroit automakers hand them more of the cash being spun up by their combustion truck franchises.
Ford on Tuesday obliged with an 18 cents a share special dividend – a move that helped send the stock up 10% since the start of the week.
Gone are the days when automakers boasted about rising “ATPs” – industry shorthand for average transaction prices. The industry is now bracing for prices to downshift.
More U.S. consumers are defaulting on hefty car loans taken on during the pandemic years as car prices soared, the New York Fed reported. Read the NY Fed blog post on auto loan trouble here.
In the fourth quarter, Tesla’s average revenue per vehicle delivered fell by 18% to $44,505, reflecting the impact of a year of price cutting to keep volumes from contracting.
Tesla’s price chopping has had jolting knock-on effects for rival automakers, and big customers such as Hertz that relied on re-selling their used Tesla’s at yesterday’s higher prices.
No Mardi Gras for the auto business. It’s already Ash Wednesday in the World of Cars.
