Tesla is set to reduce its global workforce by over 10%, according to an internal memo obtained by Reuters on Monday. This move comes amidst declining sales and heightened competition in the electric vehicle (EV) market.

In a further indication of internal shake-ups, Drew Baglino, Tesla’s senior vice president responsible for battery development, announced his resignation on X. Bloomberg also reported the resignation of Rohan Patel, vice president for public policy and business development.

The departures of Baglino and Patel, both absent from Tesla’s internal system, suggest challenges ahead for the company’s growth trajectory, according to Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors. Schulman views their resignations as a more significant negative signal than the announcement of job cuts.

Tesla, the world’s largest automaker by market value as of December 2023, did not specify the exact number of jobs affected by the layoffs. However, some employees in California and Texas have already received notifications, as per a source familiar with the matter.

“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,” stated Elon Musk 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.”

Tesla’s shares (NASDAQ:TSLA) dipped around 3% in midday trading following the news.

The layoffs come on the heels of a Reuters report on April 5, revealing the cancellation of Tesla’s long-awaited affordable car, the Model 2, which was expected to retail at $25,000. Instead, Tesla appears to be shifting focus towards self-driving robotaxis, although the timeline and specifics remain unclear.

Analysts view these layoffs as a reflection of Tesla’s maturation as a company and its evolving growth narrative. Craig Irwin, senior research analyst at Roth Capital, sees the layoffs as indicative of weak demand persisting, while others highlight cost pressures amid investments in new models and artificial intelligence.

Tesla’s challenges extend beyond its workforce reductions, as it faces stiff competition in key markets like China, where local rivals like BYD (NYSE:BYD) and Xiaomi (OTC:XIACF) are gaining ground. Additionally, Tesla aims to bolster its presence in India while addressing margin pressures and aging models.

Toyota Motor (NYSE:TM) and General Motors (NYSE:GM) have experienced contrasting market performances, with Tesla’s struggles contributing to Toyota’s and General Motors’ gains in their respective shares. Furthermore, Gartner (NYSE:IT), a prominent research and advisory company, provides insights into technology trends that may impact the automotive industry.

These strategic shifts and layoffs underscore the evolving landscape for Tesla as it navigates both internal restructuring and external market dynamics.