Tesla is dismissing contractors from its California and Nevada factories, sources say

Key Points
  • Tesla is letting go of contract workers from its U.S. car and battery plants, sources told CNBC. They estimated the cuts will affect hundreds.
  • Health orders -- implemented to curb the spread of COVID-19 -- have forced the electric vehicle maker to wind down new vehicle production.
  • The cuts follow Tesla's first-quarter vehicle production and deliveries report, which pleased investors -- the company delivered approximately 88,400 vehicles and produced 103,000 in Q1. 
Tesla Chief Executive Office Elon Musk speaks at his company's factory in Fremont, California.
Noah Berger | Reuters

Tesla is letting go of contractors from its U.S. car and battery plants, according to three workers and correspondence shared with CNBC.

The company is cutting contractors from its workforce, both in its vehicle factory in Fremont, California, and at the Gigafactory outside of Reno, Nevada, where Tesla makes the signature battery packs that power its electric vehicles and energy storage products. The cuts affect hundreds, according to estimates from the people familiar with the move, who asked for anonymity because they are not authorized to talk to press about internal matters.

Temps -- many of whom worked at Tesla for years, some hoping to jump into full-time roles -- were notified by their staffing agencies about the cuts late this week. 

A memo from Balance Staffing to dismissed workers said: "It is with my deepest regret that I must inform you that the Tesla factory shutdown has been extended due to the COVID-19 pandemic, and as a result, Tesla has requested to end all contract assignments effective immediately."

The staffing agency told workers that they would remain Balance Staffing employees, and could find other work via their business. Balance Staffing also promised it would work hard to bring the contractors back to Tesla in the future if at all possible, and reassured the workers that the dismissals from Tesla were not a reflection of the quality of their work, but rather difficult business conditions. 

Contractors hired through other temp agencies were getting similar notices on Thursday and Friday, according to the workers who spoke to CNBC.

Tesla and Balance did not immediately respond to requests for comment.

On Friday, Tesla shares rose more than 5% on a down day for markets after the company reported first-quarter vehicle deliveries that pleased investors  -- Elon Musk's electric car venture delivered approximately 88,400 vehicles, and produced 103,000 in Q1 2020. 

On the way to achieving those numbers, Tesla fought local health orders in Alameda County, where its car assembly plant is based, which would have required it to wind down to minimum basic operations as early as March 17th. Instead, it kept the Fremont plant fully operational until the end of the day on March 23rd, about a week longer than other businesses in the area, while wrangling with local authorities over whether or not Tesla was deemed an "essential business" and therefore exempt from the orders.

Tesla Q1 deliveries beat, 88.4K vs. 79K estimated
Tesla Q1 deliveries beat, 88.4K vs. 79K estimated