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.