Ask most people in the U.S. to name an electric vehicle company, and one word will immediately come to mind: Tesla. Elon Musk’s EV firm has dominated discourse—and dominates the market in many areas. It had a 62% share of the EV market in the United States in 2022. But times are tough, and Monday’s announcement that Tesla will be laying off more than 10% of its staff, or 14,000 people, is an indication that dominance is slipping.

In 2023, Tesla’s share of the U.S. EV market dropped to 55%. And in China, it’s rapidly losing ground. What’s going on is a simple case of market economics. While Tesla was one of the first to make and sell electric vehicles at scale in the mainstream, others have caught up—and look poised to overtake it, right as interest in the EV sector starts to slow.

“This is an ominous signal that speaks to tough times ahead for Tesla,” says Dan Ives, managing director and senior equity research analyst at Wedbush Securities. Automotive manufacturers have slowed investment into EVs despite year-on-year growth in sales, according to analysts S&P Global Mobility. “Demand has been soft globally for EVs and this is an unfortunately necessary move for Tesla to cut costs with a softer growth outlook,” says Ives.

“It shows Tesla aren’t immune to a slowing-market environment for electric cars and finally shows they have to cuts costs to remain competitive with new Chinese players operating with a cost advantage of around 30% over incumbents, according to a recent UBS report,” says Matthias Schmidt, an independent automotive expert based in Germany.

There was a time when Tesla had a technological advantage over competitors as they struggled to spin up their manufacturing capabilities. And Tesla was able to outmaneuver legacy auto brands who have tried to keep their gas-guzzling, internal combustion engine-based business going—though they’ve now caught up. Traditional auto firms Hyundai and Kia are Tesla’s main competitors in the U.S. market.

“Our team certainly expected Tesla’s share of the EV market to erode,” says Mark Schirmer, director of industry insights and corporate communications at Cox Automotive, an analyst firm.

If nothing else, the layoffs tell us that the EV market is maturing—and that people are no longer automatically turning to Tesla when they’re shopping for an EV. It was inevitable that Tesla would face pressures as competitors caught up. “Certainly, first movers get an advantage, but the auto market is hypercompetitive, with deep pockets and a lot of know-how,” says Schirmer. “No one expected Tesla to hold onto [its] 75%-plus share of the EV market once everyone else piled in. And they are piling in.”