News - Tesla
Tesla announces seven per cent workforce cut
Mass production of affordable Model 3 variants force Telsa to announce layoffs
21 Jan 2019
TESLA CEO Elon Musk has announced that the American electric vehicle (EV) disruptor will be cutting seven per cent of its full-time workforce in an effort to keep the company profitable with the imminent rollout of entry-level Model 3 sedans around the world.
Announced in an email to employees and in a blog post on last week, Mr Musk said the cuts are due to less expensive versions of its mass-market Model 3 sedan beginning to be rolled out in global markets this year – including Australia.
The announcement comes on the back of a nine per cent workforce cut announced in June, which was also done in an effort to ensure the company remains profitable.
Mr Musk added that Tesla’s staff grew by 30 per cent overall in 2018, which was “more than we can support”, he said.
Only full-time employees will be affected by the latest round of cuts, while Tesla will be able to retain “only the most critical temps and contractors”.
Last year proved to be the best-selling calendar year for the brand, with Mr Musk saying that Tesla sold nearly as many cars in 2018 as all its previous years combined, and in the third quarter it recorded a four per cent profit, which he called the “first meaningful profit in the 15 years since we created Tesla”.
The profit was due largely to Tesla choosing to sell higher-priced Model 3 versions in North America, the chief market for the sedan.
Mr Musk added that in the fourth quarter, preliminary results indicate a profit was also recorded, albeit a smaller one than in Q3.
In the first quarter of 2019, the company hopes to achieve a “tiny” profit thanks to the commencement of higher-spec Model 3 variants being shipped to European and Asian markets.
However, the company is predicting a tougher financial period from May onwards, as the company focuses on producing more affordable versions of the Model 3 that come with smaller profit margins.
Mr Musk said the company would have deliver at least mid-range Model 3 variant in all markets, which retails in America for $US44,000 ($A61,380).
Tesla aims to offer an entry-level version of the Model 3 priced at $US35,000 ($A48,810).
Australian versions of the Model 3 are expected to land locally mid-year.
A lower-priced Model 3 would also be particularly pertinent given Tesla estimates the price of its Model 3 will climb by $1875 when the US tax credit drops by half, and again at the end of the year when it is removed entirely.
In regards to the job cuts, Mr Musk said there would be “no other way” for Tesla to be economically viable while producing a base-level Model 3 with 220 miles (354km) of range for $US35,000.
Mr Musk thanked the departing employees, and urged existing employees that they would need to work with “extreme effort and relentless creativity” to help make the company profitable.
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