Tesla reportedly is cutting several thousand jobs to reduce costs and become profitable without endangering the production start up for its critical 'low cost' Model 3 sedan.

According to Reuters, chief executive Elon Musk, in an email he said had been sent to workers, said the cuts were part of a simplification of Tesla's management structure promised last month.

He had cited continuing "our thorough reorganisation to ensure Tesla is well prepared for the future" in a blog welcoming several new recruits to the automaker on 25 May.

"As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9% of our colleagues across the company," the email cited by Reuters read.

"These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months."

Reuters noted Tesla had been trying to hit a 5,000 per week production target of its Model 3 sedans after facing initial production hiccups. Last week, Musk said the carmaker should achieve its target by the end of this month.

CFRA Research analyst Efraim Levy told Reuters the layoffs meant more job cuts were not likely in the near-term, adding Tesla likely would raise capital early in 2019.

"I don't think if Tesla becomes profitable in Q3 and Q4, that will be sustainable because of ramping up of the production. The layoffs may help them to achieve profitability in the near-term but not sustain it."

Reuters noted Tesla had been burning through cash as it continued to spend on its assembly line and prepared for new investments on projects such as the Model Y crossover and its Gigafactory.

Free cash flow, a key indicator of financial health, widened to negative US$1bn in the first quarter from negative $277m in the fourth quarter, excluding costs of systems for its solar business.

Reuters said several Wall Street analysts anticipate a capital raise this year despite Musk's statements that would not be necessary due to profitability and positive cash flow in the third or fourth quarters.

Tesla said it began notifying affected workers this week and would continue to do so throughout the week.

A spokesman told Reuters it would reduce overall employment back to around 37,000 - roughly in line with numbers at the end of last year.

Auto market intelligence
from just-auto

• Auto component fitment forecasts
• OEM & tier 1 profiles & factory finder
• Analysis of 30+ auto technologies & more