Mass layoffs and Model 2 delay, Musk "All In" on RoboTaxi and FSD

Delaying Model 2, a 40% stock price plunge, global massive layoffs... Tesla returns to a chaotic "wartime mode", triggered by a strategic shift led by Musk: shifting focus from launching new car models to fully promoting autonomous driving.

Earlier this year, the hottest topic surrounding Tesla was the entry-level model Model 2, which had been brewing for four years and positioned lower than Model 3. This car was originally expected to start production in mid-2025, helping Tesla break through the intense global price war and open up a new growth curve.

However, plans did not keep up with changes. Earlier this month, media reports stated that Tesla had abandoned the development plan for the affordable Model 2 and shifted its focus to developing Robotaxi. Subsequently, Musk announced that Robotaxi would be officially launched on August 8th, essentially confirming the content of this report.

The latest media reports also revealed that Tesla is "doing everything possible for autonomous driving", with the priority now being on Robotaxi over new car models in terms of setting timelines and arranging production capacity.

This shift came as a sudden and unexpected surprise to investors, analysts, and even Tesla insiders, with Tesla's stock price accelerating its decline after the news. This Tuesday, Tesla will release its first-quarter financial report, and current market expectations are not optimistic.

Walter Isaacson mentioned in "Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future" that Musk sometimes enters a "destructive demon mode", which can cause a lot of chaos but also make Musk more efficient in achieving his goals.

Currently, Musk, in his "demon mode", may not care about the temporary chaos, focusing wholeheartedly on "All In" RoboTaxi and FSD.

"Wartime CEO" Fully Betting on FSD

Last week, after sending an email to the entire company announcing layoffs of over 10% globally, Musk liked a post on X, which stated that Musk had re-entered the wartime CEO mode and decided to bet the entire company on Robotaxi.

Musk also changed his profile picture on X back to the devil champion costume he wore on Halloween 2022.

A 10% reduction in workforce implies that Tesla will cut over 14,000 jobs globally, but according to sources cited by the media, the actual number of layoffs may exceed 20,000. Musk's reasoning is that Tesla should reduce its workforce by 20% because from the fourth quarter to the first quarter, Tesla's vehicle deliveries decreased by 20% For those employees who managed to avoid being laid off and stayed at Tesla, their feelings at this time are more uneasy than fortunate. According to the above-mentioned media, Tesla employees believe that Musk has fundamentally changed the "marching orders," as he declared last week that the company is "doing everything possible for autonomous driving."

The media cited an insider as saying that whether in setting schedules or arranging production capacity, robotaxis now take precedence over a cheaper car Musk first proposed four years ago.

Musk's obsession with autonomous driving has been long-standing, as he once referred to himself as "the boy who cried for FSD."

For a long time, Musk has viewed autonomous driving and Robotaxi as Tesla's most important products, believing their potential value could be as high as trillions of dollars. For over a decade, he has been talking about the prospects of autonomous driving and convincing customers to pay thousands of dollars for FSD products.

Investors are losing patience

Tesla's sudden strategic shift is likely due to Musk and engineers seeing breakthrough progress in FSD.

According to media reports, in November last year, Tesla began rolling out the fully autonomous driving (FSD) V12 version to employees. FSD V12 is considered a major leap forward for Tesla in autonomous driving technology, as it is the first time Tesla has started using neural networks for vehicle control, including steering, acceleration, and braking.

Tesla's Director of Autopilot, Ashok Elluswamy, wrote on X last month that this should bring "unprecedented progress."

However, the optimism of Musk and the engineers about FSD is overshadowed by concerns about regulatory uncertainty.

In the U.S., autonomous vehicles are currently only allowed to conduct limited testing in specific areas, with varying regulatory attitudes among states. The widespread promotion of FSD across the U.S. and globally faces many legal and regulatory obstacles, significantly narrowing its marketability, affecting production capacity and profitability.

Nevertheless, Musk still believes that by offering FSD to more consumers and lowering prices, Tesla can make robotaxis a reality. He is pushing for test drives and a 30-day free trial to promote this feature, increase revenue, and collect more data.

However, investors have little patience left for Tesla.

Bloomberg analyst Steve Man stated that investors, especially institutional investors, are losing patience, and the initial hype about fully autonomous driving and robotaxis has waned, "the pendulum has swung in the opposite direction."

Deutsche Bank analyst Emmanuel Rosner stated last week, "Tesla's stock will need to undergo a potentially painful ownership shift, as investors previously focused on Tesla's electric vehicle sales and cost advantages may throw in the towel." He downgraded Tesla's stock rating from buy to sell and slashed the target price by more than a third.

This Tuesday, Tesla will announce its first-quarter performance, with the market expecting a 40% plunge in operating profit and the first revenue decline in four years.