Tesla Inc. has instructed workers on Model Y and Cybertruck production lines at its Austin factory to stay home during Memorial Day week. This marks an unusually extended break as the automaker grapples with declining deliveries.
What Happened
Workers, who are paid hourly, were notified earlier this week that they could either use paid time off or report for cleaning and training duties, but wouldn’t work on production lines. Employees indicated production schedules have been increasingly inconsistent since February, with many sent home early multiple times.
Production Pause
The production pause follows Tesla’s first-quarter delivery decline of 13% year-over-year and comes amid mounting inventory concerns. The company produced nearly 26,000 more vehicles than it delivered in the first quarter, despite already reducing production by approximately 100,000 units compared to the previous quarter.
Inventory Concerns
Tesla’s inventory concerns are particularly pronounced with regards to the Cybertruck. Reports suggest that over 10,000 units remain unsold, with the company delivering fewer than 50,000 Cybertrucks as of March. The company has introduced discounts on the refreshed Model Y launched in January and released a cheaper variant in an attempt to stimulate demand.
CEO Elon Musk’s Warning
CEO Elon Musk warned during an April earnings call that “if the ship of America goes down, Tesla will go with it” after the company reported a 71% plunge in net income to $409 million. Tesla’s core automotive revenue tumbled 20% to $14 billion.
Price Action
Tesla’s stock closed at $298.26 on Friday, up 4.72% for the day. In after-hours trading, the stock rose slightly to $299.29, gaining an additional 0.35%. Year to date, Tesla shares are down 21.36%.
Conclusion
Tesla’s extended Memorial Day break amid declining deliveries and rising inventory concerns raises questions about the company’s ability to stimulate demand and navigate the challenging automotive market. With the company’s stock down 21.36% year to date, investors will be watching closely to see how Tesla responds to these challenges.