Tesla Follows SpaceX Lead, Cuts Seven Percent of Workforce

Tesla's overarching challenge is making cars, batteries and solar products cost-competitive with fossil fuels, Musk said Friday in the blog post.

Tesla shares fell 12.97 per cent - or US$45.05 - to close Friday at US$302.26.

Tesla will also keep only the "most critical temps and contractors", according to Elon Musk.

Tesla's slim profit margin shrunk even more from the third to the fourth quarter of 2018, but still remained positive, Musk said. It's absorbed some of the cost challenges by initially selling only higher-priced versions of the Model 3, its first vehicle billed as a auto for the masses.

The automakers also fell short on quarterly deliveries of its mass-market Model 3 sedan. Though results for Q4 aren't quite settled yet, he says that "preliminary, unaudited results indicate that we again made a GAAP profit, be less than Q3". That goal was announced in May of 2016 based on advance orders for its mid-range Model 3, which Musk said sells for $44,000. At the end of the email, Musk mentions that Tesla has the most exciting upcoming products of any "consumer product company", saying that "full self-driving", the Semi truck, the new Roadster, a pickup, a Model Y crossover, and more are all on the way.

"While we have made great progress, our products are still too expensive for most people,"Musk said". In the second half, though, Ives stated that Tesla would need to start producing more affordable versions of the electric sedan for the worldwide market. Until the start of 2019, an American Tesla customer got a $7,500 tax credit. The cuts will hopefully help Tesla's quest to increase Model 3 production and finally introduce the $35,000 Standard Range variant that has been talked about since the Model 3's inception.

Tesla, essentially, finds itself in something of a tough place at the moment, as it needs to cut costs while at the same time ramping up production. "Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very hard".

Tesla is still aiming to offer a $35,000 version of the Model 3 with a range of 220 miles.

Tesla has been making other cost-cutting moves too.

Tesla's announcement today made several references to lower-priced EVs while ignoring competitiveness at the top end of the market - perhaps Tesla has already reconciled with losing market share among a group of more expensive electric vehicles while losing confidence in a never-ending pool of wealthy buyers who would consider Tesla.

A major effort allowed Tesla to ramp up production of the Model 3 a year ago and make it 2018's best-selling premium vehicle in the U.S. But skeptics have wondered when those sales volumes would exhaust the untapped demand for the $50,000-plus electric auto.

  • Eleanor Harrison