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It was only a matter of time when Tesla's scorched earth policy of employing aggressive price cuts to stimulate waning demand would have started producing unintended consequences.
Recently, we got out first glimpse at one such consequence when Tesla's workers at its Shanghai Gigafactory started flooding the social media airwaves with personal appeals to Elon Musk following a facility-wide intimation over the weekend of cuts to performance bonuses.
Some workers believe that they are being unfairly punished for a fatal accident that occured at Giga Shanghai's welding workshop in February, resulting in the unfortunate loss of life of a worker. The ensuing government investigation revealed safety lapses that had directly contributed to the incident.
$TSLA cuts bonuses at its Shanghai factory. Total red flag for Q1 earnings this Wednesday if it's retroactive.
Or a sign that $TSLA is already looking at how to trim costs amid sagging Chinese auto demand & a massive price war. https://t.co/EwHHs0JoJg
— Motorhead (@BradMunchen) April 17, 2023
Nonetheless, the fact remains that Tesla will be able to incur some cost savings on the back of it's bonus curtailment. As per a number of online posts, the quarterly performance bonuses have been slashes by around 2,000 Yuan or $292. When averaged over the 20,000 workers at Giga Shanghai, the savings compute at around $5.8 million.
If, however, this bonus curtailment is retroactive in nature, it would strengthen the thesis around Tesla's rapidly weakening financials.
They might just reduce the headcount instead, no? My understanding is the total comp with overtime + bonuses is that people count on, so they probably would be very upset without part of the compensation they need. Better just layoff some people, hopefully discreetly.
— Yolo𝕏ing of $TSLAQ (Supervised) (@yoloption) April 17, 2023
Given the fact that Tesla's Chinese workers rely on performance bonus as well as overtime compensation as a crucial part of their overall pay, the bonus curtailment is rightly causing quite a lot of consternation.
As stated earlier, Tesla has been rapidly cutting the prices of it's EVs in key regions across the globe. The company's Average Selling Price (ASP) metric declined by 15 percent in Q1 2023. In early April, Tesla again slashed the prices of its Model S and Model X by up to 5 percent in the US.
Tesla has also launched a new lower-priced AWD variant of the Model Y, featuring the much-anticipates 4680 battery cells. Other variants of the Model Y have received a price cut of around $2,000 in the US in recent days. The base Model Y is now priced at a discount of around 20 percent relative to it's price at the end of 2022.
Last week, Tesla also reduced the prices of it's EVs by as much as 9.8 percent in Europe and Israel, while Singapore has also benefitted from this price-cutting spree.
$TSLA: BARCLAYS CUTS TARGET PRICE TO $230 FROM $275
— *Walter Bloomberg (@DeItaone) April 17, 2023
Meanwhile, Barclays reduced it's price target for Tesla shares by 16 percent today on the back of the company's aggravating margin compression.
$TSLA shill Adam Jonas grossly misunderstands Tesla's Q1 guidance.
He thinks Tesla aimed for 20% Auto gross margin ex-credits (LEFT), while Tesla clearly said "over 20%" Auto gross margins ex-leases *AND* credits (RIGHT).
Ex-credits only would be > ex-leases & credits. pic.twitter.com/nqy8gqS30e
— Motorhead (@BradMunchen) April 17, 2023
Tesla permanull, Morgan Stanley's Adam Jonas, however, remains quite sanguine. According to the analyst, Tesla should be able to "eke out a decent 1Q result" on the back of aggressive cost savings and factors such as lower spot lithium prices. But the company's automotive gross margin might tumble below the self-imposed hard-deck of 20 percent to as low as 17 percent.
Tesla is slated to report it's Q1 2023 earnings later this week.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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