Tesla cuts workforce by 7 percent, warns of “very difficult” road ahead

Tesla announced that it will cut around 3,000 jobs – some 7 percent of its workforce – as it struggles to bring Model 3 prices down to an affordable, mass-market level.

Elon Musk said the company did manage to squeeze out a profit in the final quarter of 2018, but warned that the “road ahead is very difficult.”

Tesla increased staff by 30 percent last year, which is “more than we can support,” Musk said in a blog post. The company has been keeping margins up by selling only higher-priced versions of the Model 3, but it needs to bring out the long-awaited $35,000 version soon. “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.”

Tesla’s grand goal is to make EVs cost-competitive with ICE vehicles, but it isn’t there yet. “While we have made great progress, our products are still too expensive for most people,” Musk said. “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.”

If it’s any consolation, the legacy automakers have troubles of their own, and are far from making EVs profitable. GM’s impending layoffs and plant closures have been much in the news. Ford plans to cut thousands of jobs in Europe – perhaps as many as 25,000, according to Morgan Stanley. Jaguar Land Rover is cutting 4,500 jobs, most of them in the UK, and Nissan just announced 700 job cuts at its Mississippi plant.

 

Source: Bloomberg

  • Dennis Worley

    If I was being made redundant I would call for a UBI !!!

    • dogphlap dogphlap

      Great idea but neither of the two main US political parties are going to go against their donors perceived (and probably expressed) interests by legislating for a universal basic income.
      I’m ambivalent when it comes to unions but when the company you work for fires you or looks like it might they are someplace to turn to. I’m generally in favour of them but I’m also aware of the connections there have been to organised crime (particularly in the US) and the insane demarcation disputes between rival unions that killed off vehicle manufacturing in the UK.
      SpaceX and now Tesla have both announced big reductions in their labour force (10% in the case of SpaceX). These companies are where they are today because of the extra miles put in by dedicated hard working individuals, it is a dangerous strategy to under value the good will that is so easy to destroy when workers are forced into the us vs them mindset.

  • robus

    Elon is causing everyone whiplash with these back and forth statements. I’m as big a Tesla fan as the next guy, but I don’t know how to interpret this news with the statement made last quarter about how Tesla was going to be profitable from here on out. Certainly the claim was not made in a way that made it seem that it was going to be an ongoing struggle of barely scraping by.

    Starting to think Elon might be a bit bi-polar 🙂 Everything’s great! Wait, everything sucks! 😀

    Perhaps pull back on some of the crazier things (Boring Co.) and focus on execution. Or clone Gwynne Shotwell so that someone calm and competent can run the day-to-day operations.