Tesla to cut thousands of jobs to reduce costs

Tesla Model 3

Tesla announced on Friday it would cut thousands of jobs to reduce costs as it plans to hike production of lower priced versions of its Model 3 sedan, Reuters reported.

Tesla aims to cut full-time employee headcount by about 7 percent and retain only the most critical temps and contractors. Tesla did not reveal the number of employees who will be impacted by the job cut.

The US-based green vehicle company in June said it would be cutting 9 percent of its workforce. Tesla chief executive officer Elon Musk had tweeted in October that the company’s team had 45,000 people.

The electric vehicle company also said it expects fourth-quarter profit to be lower than the previous quarter.

Tesla reported a profit of $311.5 million, or $1.75 per share, for the third quarter ended Sept. 30.

Tesla chief executive officer Elon Musk said the company would need to deliver at least the mid-range Model 3 version in all markets starting around May, as it needs to reach more customers who can afford the vehicles.

In addition, Tesla said it needs to continue making progress toward a lower-priced Model 3, a car that was unveiled in early 2016. But Tesla has scrambled to get the Model 3 into the hands of customers.

This is Tesla’s second job cut in seven months and comes days after it cut U.S. prices for all vehicles and fell short on quarterly deliveries of its mass-market Model 3 sedan.

Musk in a memo to employees said 2018 was the “most challenging in Tesla’s history,” adding the company hired 30 percent employees last year which was more than it could support.

Tesla sales benefited from a $7,500 federal tax credit on electric vehicles throughout 2018, but that full credit expired at the end of 2018, and new buyers will now receive only half that amount.

“This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit,” Musk said.