Tesla cuts over 3,000 jobs as Musk sees difficult road ahead

Bloomberg

Elon Musk is cutting Tesla Inc.’s workforce by 7 percent — or more than 3,000 jobs — warning that the “road ahead is very difficult” in making electric cars more affordable for the mass market. Tesla shares fell as much as 7.7 percent shortly after the start of regular trading. Musk wrote in a blog post that the Palo Alto, California-based company managed to eke out a profit in the final three months of 2018, though narrower than the hard-won third-quarter earnings it reported in October.
Tesla is under pressure to limit spending as it emerges from what Musk called the “most challenging” year in its history. While it succeeded in scaling up output of its Model 3, the company missed analysts’ production targets during the fourth quarter, and it’s cut prices to partially make up for the halving of a US tax credit that’s acted as a buyers’ incentive. The credit is set to drop again in July before going away entirely at the end of the year. Tesla increased staff by 30 percent last year, which is “more than we can support,” Musk said. It’s absorbed some of the cost challenges by initially selling only higher-priced versions of the Model 3, its first vehicle billed as a car for the masses. Until now, the cheapest configuration available of the vehicle has cost $44,000, Musk said. As production increases over the next few months, the company will need to sell lower-cost versions, he said.
“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,” Musk said. “Moreover, we need to continue making progress towards lower priced variants of Model 3.”
The chief executive officer has tweeted before about the risks involved with selling cheaper versions of the Model 3 too soon. He warned in May that Tesla would “lose money & die” if it shipped a $35,000 version of the sedan right away.
Tesla had about 45,000 employees, Musk tweeted in October. Based on that figure, the 7 percent cut works out to be about 3,150 jobs lost. The company is also expanding in Europe and China, which will be costly, said Sven Diermeier, a Frankfurt-based analyst at Independent Research GmbH.