The cuts in its workforce are a move to increase profits at the company while reducing costs, according to a companywide email Tesla CEO Elon Musk sent to all Tesla employees this morning.
In the email, Musk says one of Tesla’s top challenges going forward is “making our cars, batteries, and solar products cost-competitive with fossil fuels” and acknowledging “our products are still too expensive for most people.” Musk went on to explain that the company’s cheapest vehicle is the mid-range Model 3, which costs $44,000–still too much for the average consumer. If it wants to reduce prices, Tesla will need to cut costs in its workforce:
As a result of the above, we unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors. Tesla will 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 $35K and still be a viable company. There isn’t any other way.
As of now, there is no word on which workers in Tesla will be hit the hardest, but laying off 7% of its workforce suggests cuts will come from multiple disciplines, locations, and departments.