Following an internal email on Friday, Tesla announced that it has cut seven per cent of its full-time workforce. Reports suggest that the move is aimed at shaving overhead expenses to produce more affordable Model 3 sedans.
In its current lineup, Tesla has the Mid-Range and Long-Range Model 3s that deliver 418km and 498km of range respectively. The aforementioned affordable model was announced by the company in 2018 which will sit below the Mid-Range model with a price tag of $35,000.
In its current lineup, Tesla has the Mid-Range and Long-Range Model 3s that deliver 418km and 498km of range respectively.
The seven per cent cut comes after the company saw a 30 per cent increase in jobs in 2018, Tesla CEO Elon Musk pointed out in the email. On Friday, Bloomberg reported that Tesla had close to 45,000 staff in 2018 which would account for as many as 3,150 jobs with the latest cut.
These cuts could represent the beginning of a new focus on profitability at the American EV giant which has earlier accounted high cash burn rate. Reports suggest that the company had earlier posted a GAAP-reported profit of $312 million on record revenues of $6.8 billion in the second-last quarter of 2018. This was described as Tesla’s first “meaningful profit” in its 15-year history by Musk in the email.
The job cut is is aimed at shaving overhead expenses to produce more affordable Model 3 sedans.
Meanwhile, he also stated that the company could expect lower profits for the fourth quarter despite higher deliveries. This was, however, due to profits of the third quarter that were supplemented by a higher proportion of top-end models such as the higher-range Model 3. Apart from that, Musk also reiterated that the affordable Model 3 was crucial for the company as Tesla buyers are expected to lose access to federal tax credits for EVs at the end of 2019 in the USA.
Earlier this month, British automaker Jaguar Land Rover announced that it was cutting close to 4,500 jobs worldwide while it deals with slowing sales. Similarly, Ford also slashed thousands of jobs in its European operations along with General Motors, which last year, stated that it was cutting jobs and ending production of slow-selling sedan models.