Tesla to Cut 3,200 Jobs

January 18, 2019 at 11:06 AM

Tesla Inc., which expanded its workforce 30% in 2018, now says it must cut its staff by 7% (about 3,200 people) to lower product costs and help achieve sustainable profitability.

Tesla posted a 4% profit in the third quarter last year and is likely to report a “tiny” profit for the final period, says CEO Elon Musk. But he tells employees via email that layoffs are unavoidable as the company struggles to deliver on a long-promised $35,000 version of its Model 3 electric sedan.

The cheapest version of the Model 3 in any market currently costs $44,000. “We need to reach more customers who can afford our vehicles,” Musk says.

Musk points out that the pressure to cut costs will rise dramatically this year. That’s because the $7,500 U.S. tax credit available to new Tesla’s customers is shrinking and will disappear entirely by year-end.

He says that offsetting the resulting rise in purchase price will require manufacturing improvements that enable the company to reduce costs, hike throughput and gain production economies of scale.