Elon Musk admits Tesla faces “a very difficult” road ahead.
You would think Tesla's workforce would be in good spirits right now. Last year, the automaker posted a quarterly profit for the first time in years. The Model 3 was also the best-selling premium car in the US in 2018. However, Elon Musk has announced Tesla is cutting around seven percent of its workforce to reduce costs and ramp up Model 3 production.
In an email sent to employees, Musk said the company faces a "very difficult" road ahead in its long-term goal to sell affordable renewable energy products. "Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months," Musk said.
"Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause."
The number of employees affected by the lay-offs has not been revealed, but Tesla employees roughly 45,000 staff, which means around 3,000 jobs will be cut.
Musk added that, while the company has seen strong growth, it is difficult to make Teslas with new and developing technology as cheaply as conventional cars. Remember, Tesla has only been producing cars for around a decade compared to other mainstream manufacturers. As a result, the company's cars are still "too expensive for most people" and its profits are still too low.
"This quarter will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit," he wrote. "However, 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. Moreover, we need to continue making progress towards lower priced variants of Model 3."
Just last week, Tesla discontinued the cheapest variants of the Model S and Model X. Currently, the cheapest version of the Model 3 costs $44,000 but we're still waiting for the long-promised $35,000 entry-level model to arrive, which will require "higher volume and manufacturing engineering improvements," according to Musk.