Tesla CEO Elon Musk has announced that the company will be cutting 7 percent of its full-time employees this year. In the company-wide email, Musk also announced that Tesla would end up keeping “only the most critical temps and contractors.” The layoffs are expected to impact roughly 3,000 Tesla employees, according to the Verge.
Musk took to his blog to explain the reasoning behind the mass layoffs, saying it had been the “most challenging” year in the history of the company. The cutbacks announcement comes only one day after Tesla officially announced it would also be ending its customer referral program in the hopes that it would help reduce costs. The referral program previously allowed people to give their friends a code that granted them six months of free charging on Tesla’s Supercharger network. The program will come to an end on February 1.
Part of the turmoil Tesla experienced this year comes from the launch of the Model 3, which is the company’s first mass-marketed vehicle. This led to all sorts of complications as the company grappled with production issues and struggled to scale up as it had originally intended.
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” Musk said in his blog.
The Tesla customer referral program will end on Feb 1. If you want to refer a friend to buy a Tesla & give them 6 months of free Supercharging, please do so before then.— Elon Musk (@elonmusk) January 17, 2019
While Tesla did make a profit in 2018, it was nowhere near where experts had hoped it would be. It only managed to achieve a small profit in the less two quarters, with Q3 proving to be the best. Some think that a big factor in Tesla’s issues is the cost of the Model 3 itself. While the base price is claimed to be around $35,000, that number has proved to be false. The least expensive version of the Model 3 comes in at $44,000 — a significant price jump for the electric car.
Musk acknowledged that the company will need to make some big moves if it’s expected to be profitable in 2019. He expressed concern about the upcoming loss of tax credits, which will end up making the electric cars even costlier — which could have a devastating impact on already-sluggish Tesla sales.
Musk’s next goal is to create mid-range Model 3 options for all markets. He believes that the lower-priced cars will sell significantly better than their pricier counterparts and bring in much-needed revenue for the company. Tesla plans to roll out the mid-range Model 3 vehicles in May.
The USA’s federal tax credit for electric cars will be cut in half on July 1. The amount of tax credit will be cut to $1,875, before being completely removed on December 31 of this year.