Tesla Cuts 7 Percent of Full-Time Workforce

Despite record sales last year, and profitability in recent quarters, Tesla is reducing its full-time employee headcount by 7 percent. CEO Elon Musk made the announcement in an email to Tesla employees on Friday.

Tesla’s headcount grew by 30 percent last year, which was more than the company can support, Musk said in the note. The email discussed the company’s current challenges, namely making its products more cost-competitive.

Right now, the least expensive Model 3 costs $44,000 before tax credits. This model has the mid-range battery with an estimated 264 miles per charge. Federal EV credits dropped from $7,500 to $3,750 on January 1, 2019 and they will fall again to $1,875 on July 1. We’re still waiting on the lower-price Model 3, which Musk has promised will cost $35,000.

“Tesla will need to make these [job] cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” Musk said in the statement. “Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35K and still be a viable company. There isn’t any other way.”

Tesla made a 4-percent profit in Q3 last year. Preliminary results indicate the company will post a profit again for Q4, but it should be less than the previous quarter. With the help of the higher-priced Model 3 deliveries around the world, the automaker expects to continue a profit in the new quarter. Despite production bottlenecks, the Model 3 was the best-selling luxury vehicle in the U.S. last year.

This is the latest round of layoffs after Tesla announced last June it dropped 9 percent of its workforce. The company noted the duplication of some roles, and said it needed to reduce costs and focus on profitability. It said production of the Model 3 would not be affected by these cuts.

Read the entire statement from Musk here.

Source: Tesla

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