Tesla CEO Elon Musk says automaker to cut workforce by 7 percent | News Coverage from USA

Tesla CEO Elon Musk says automaker to cut workforce by 7 percent

Describing a “very difficult” road ahead, Tesla CEO Elon Musk on Friday said the automaker would cut its staff by about 7 percent.

The Palo Alto, California-based company grew by 30 percent last year, but struggles to remain profitable at that staffing level, Musk said in a memo to Tesla employees also posted on the company’s website. The company had a “tiny profit” in the third quarter and expects to post an even smaller one in the fourth quarter, Musk said. 

Tesla must make the job cuts as it ramps up production of the Model 3, he said.

“While we have made great progress, our products are still too expensive for most people,” Musk said. “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.”

A 7 percent staff reduction would mean about 3,150 employees would be let go, based on Musk’s tweet in October that Tesla has 45,000 employees.

“We unfortunately have no choice but to reduce full-time employee headcount by approximately 7 percent … and retain only the most critical temps and contractors,” Musk said.

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Tesla delivered more than 245,000 electric cars and SUVs last year, nearly as many as all previous years combined. But its 2018 production fell far short of a goal set nearly three years ago of manufacturing 500,000 vehicles for the year. That goal was announced in May 2016 based on advance orders for its mid-range Model 3, which Musk said sells for $44,000.

“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,” Musk said. “There isn’t any other way.”

Tesla’s shares fell earlier this month after it cut vehicle prices by $2,000 and announced fourth-quarter sales figures that fell short of Wall Street estimates. The company faces growing competition from other automakers including General Motors, Ford, Volkswagen and Nissan.

“Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors,” he said. “The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.”

“Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity,” he said in the memo, “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.”

Tesla will begin selling the Model 3 in Europe and China in February, a significant milestone in the company’s global goals. Its factory in Shanghai is its first outside the United States.

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Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

Contributing: The Associated Press

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