In a surprising turn of events, Tesla's stock experienced a significant drop of almost 6% in response to CEO Elon Musk's announcement of more than 10% job cuts across the company's global workforce. This comes as a departure from the typical market reaction, where stock prices tend to rise after job cut announcements. The declining shares reached their lowest level since May of last year.

In a memo to employees, Musk expressed his reluctance towards the decision, stating, "There is nothing I hate more, but it must be done." However, the market responded with pessimism, resulting in Tesla shares spiraling downward since the beginning of the year. In the first quarter alone, the stock plummeted by 29%, marking the worst performance since late 2022 and the third-steepest drop since the company went public in 2010. Currently, Tesla's stock is approximately 60% below its peak, reached in November 2021.

Historically, Tesla's past layoffs did not elicit such negativity from investors. In 2018, when the company cut 9% of its workforce, shares actually rose by more than 3%. Even in 2022, when initial reports of layoffs caused a 9% drop in the stock price, the market rebounded after Musk provided clarifying statements.

However, the current situation presents Tesla with new challenges. The automaker recently reported a decline in vehicle deliveries in the first quarter, marking the first annual decrease since 2020 due to the disruptions caused by the COVID-19 pandemic. Moreover, Tesla faces stiff competition in China from domestic electric vehicle manufacturers such as BYD and Xiaomi.

Prior to the layoffs, Tesla had been reducing prices and offering buyer incentives, potentially leading to margin erosion. Last week, the company announced a 50% reduction in the subscription price of its premium driver assistance system, marketed as Full Self-Driving (FSD), for customers in the United States. It's worth noting that FSD does not enable vehicles to operate autonomously and requires an attentive driver at all times.

In addition to the layoffs, Tesla executives Drew Baglino and Rohan Patel also announced their departure from the company. Baglino, who had been with Tesla since its early years, is a firmware and electrical engineer who joined the company in 2006. Patel, who joined Tesla in 2016, previously served as a senior advisor to former President Barack Obama on climate issues and other matters.

Analysts and investors are now raising concerns about Tesla's demand prospects. FactSet reports that 18 analysts have lowered their price targets for Tesla shares this month, with none becoming more bullish. The company's ability to build the low-cost Model 2 and the recent price cuts on FSD are also generating questions about its future.

Moreover, Tesla has acknowledged that its growth in 2024 might be significantly lower compared to previous years. The company has refrained from providing specific guidance for 2024, citing the changing dynamics of the electric vehicle industry and increased competition.

Added to these challenges is the unpredictable nature of CEO Elon Musk. With his involvement in various ventures such as SpaceX, X, xAI, Neuralink, and The Boring Co., Musk has faced scrutiny from regulatory agencies and concerns from shareholders about his commitment to Tesla. Musk has maintained that he has not missed any "important" meetings at Tesla and insists he is not "totally missing in action."

At the time of reporting, Tesla did not respond to CNBC's request for comment.

Overall, Tesla finds itself in a complex predicament, facing market pessimism and increased competition while undergoing significant layoffs and executive departures. As investors reevaluate their positions, the future trajectory of the company remains uncertain.