Tesla CEO Musk has told employees the company will cut about 7% of its workers as its cars are too expensive.
The automaker employs around 45,000 people so that will work out at about 3,000.
Go deeper with GlobalData
In an email to staff, Musk said Tesla would “retain only the most critical temps and contractors”.
Tesla would need to “make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months. 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 US$35,000 and still be a viable company. There isn’t any other way”.
He said 2018’s Q3 4% profit was in part the result of preferentially selling higher priced Model 3 variants in North America.
“In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“However, starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44,000. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.”
Michelle Krebs, executive analyst, Autotrader, said: “This year will be challenging for all automakers as we are forecasting a dip in new vehicle sales. It will be especially challenging for Tesla as it desperately tries to rack up more quarterly profits after having one in the third quarter, and it faces an onslaught of competitors in the next couple of years.”
Brian Moody, executive editor, Autotrader added: “It has always been hard to make affordable electric cars, that’s why all car buyers and taxpayers have to subsidise them through taxes and government incentives. Tesla should never have promised affordability in the first place. The real future for EVs is luxury cars like the Jaguar I-Pace and automated delivery and taxi services.”
