Tesla To Cut Workforce By Seven Percent

Dwayne Harmon
January 19, 2019

In a letter to employees, CEO Elon Musk wrote that its electric vehicles were "still too expensive for most people", and called the road ahead "very hard". "There isn't any other way".

Last year, Elon Musk boasted that the company's staff totaled 45,000 people, which means that the pending cut would put 3,150 out of work.

In an email sent to Tesla employees that was later published on its website, CEO Elon Musk announced that approximately 7% of Tesla's full-time employees will be let go.

Tesla's cheapest model right now is the $44,000 Model 3, and it needs to broaden its customer base to survive. The good news is that the company is making a major push to produce a cheaper Model 3 - though Musk says that the Model 3 was the best-selling premium vehicle in the U.S. past year, its starting price of $44,000 is "still too expensive for most people". So, not only is Tesla in a position where it needs to figure out how to make the Model 3 less expensive, it has to do so with a diminishing United States tax credit that incentivizes buying one. As for Q4 2018, Musk stated that there is a good chance Tesla would be able to make a profit as well, though not in the same level as the third quarter. It will also have to somehow offset the scrapping by the end of the year of the USA tax credit for electric cars. A 7 percent cut would involve laying off about 3,150 people.

But Tesla's longer-term success will depend on bringing down Model 3 production costs, Musk argued. Tesla stock (TSLA) closed down nearly 13%, or $45, to about $302.

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Shares in the auto manufacturer opened more than 6 percent lower as trading began in the United States on Friday.

The company delivered more than 245,000 electric cars and SUVs last year, almost as many as all previous years combined. In fact, he says that Tesla's 2018 growth was "more than we can support;" the company grew by 30% in the past year. The company was stuck in "production hell", as Musk dubbed it, as Tesla raced to produce 5,000 Model 3 sedans - it's most affordable auto - per week, a goal it ultimately reached.

The key for Tesla is producing an entry-level vehicle in the mid-$30,000 range, which would put it in direct competition with major automakers. I am deeply grateful for your contributions to Tesla.

It is expected that a locally produced Tesla auto, with reductions in manufacturing and logistics costs on top of the exempted import tariffs, would cost as little as 300,000 yuan - a price level that could prove attractive to thousands of mainland buyers.

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