Tesla is set to trim its global workforce by over 10%, according to an internal memo obtained by Reuters, amidst a challenging landscape marked by dwindling sales and escalating competition in the electric vehicle sector.

The automaker, led by CEO Elon Musk, conveyed its intention to streamline operations to bolster efficiency and cut costs in preparation for the company’s forthcoming growth phase.

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Tesla CEO Elon Musk said in the memo.

“As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” it said.

With 140,473 employees worldwide as of December 2023, Tesla’s precise job reduction figures remain undisclosed.

The decision to downsize comes in the wake of a recent downturn in global vehicle deliveries for Tesla, the first in nearly four years, despite efforts to stimulate demand through price adjustments.

Amidst sluggish sales and stiff competition, particularly in China’s burgeoning electric vehicle market, Tesla faces mounting pressure to fortify its position. The company’s decision to scrap plans for a budget-friendly vehicle, anticipated to drive broader market penetration, further underscores its strategic recalibration.

Tesla’s financial performance reflects the challenges it confronts, with a reported gross profit margin of 17.6% in the last quarter, the lowest in over four years.

This latest round of layoffs follows a 4% reduction in Tesla’s New York workforce in February of the previous year, undertaken as part of routine performance evaluations and preceding a unionization push by employees.

As Tesla braces for its upcoming quarterly earnings report on April 23, investors and industry observers alike await insights into the company’s strategies for navigating a shifting automotive landscape.