Tesla to cut thousands of jobs in profitability drive

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Elon Musk's electric vehicle manufacturer Tesla Motors announced Friday it was cutting its workforce by about seven percent in a push to keep the Model 3 affordable for middle-income consumers.

It has been Tesla's long-held goal to get a less-expensive, mid-range Tesla Model 3 on the road.

He added: "Telsa will make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months".

However, while it ramped up production of its mid market Model 3 vehicle, it said its products were too expensive for most people and its profits too low.

"There isn't any other way", Tesla CEO Elon Musk said in a letter to employees posted on the company's website.

The US government had put into place a $7,500 tax incentive for people to buy electric cars, but President Donald Trump and other Republicans consider the credit a waste of taxpayer money and want it eliminated. In the second half, though, Ives stated that Tesla would need to start producing more affordable versions of the electric sedan for the global market.

Perhaps most notable in the letter, though, is Musk's discussion about Tesla's capability to make a profit. Jaguar Land Rover will also cut nearly 5,000 jobs, and Nissan is also making layoffs.

Do the Tesla numbers add up?

The company delivered more than 245,000 electric cars and SUVs last year, almost as many as all previous years combined. Tesla began taking deposits for the vehicle three years ago and has yet to deliver at that price point. It's not a staggering amount by any means, but it was nonetheless a symbolic victory for Tesla and proof that the mass market Model 3 was capable of helping the company turn a corner. Furthermore, Tesla hopes to deliver Model 3s to Asia and Europe in the next three months. But the expansion of the company in the last 14 years has led to "some duplication of job roles and some job functions that, while they made sense in the past, are hard to justify today", he added.

Tesla will replace the defective devices, the company said.

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"If it can stay viable, we think (Tesla) can enjoy strong momentum with the Model 3 for a while because the vehicle is just now being sold in foreign markets and the entry-level version is not available anywhere", Whiston said.

"While EV competition is accelerating, we believe Tesla continues to lead the industry as it moves Model 3 price point towards US$35k while most competitors remain engaged in an EV negative margin sum game at higher price points", wrote Jefferies analyst Philippe Houchois.

To support the staff reduction, Tesla is also ending a program which rewarded customers who referred new buyers with chargers and free cars. After that threshold, it's halved, and then halved again before it is phased out. And GM's market capitalization was $54.5 billion - slightly above Tesla's.

Tesla started building its Gigafactory 3 at Lingang, Shanghai earlier this month to locally make affordable cars for customers in the world's largest auto and electric vehicle market.

Elon Musk speaks at a SpaceX event in Hawthorne, Calif., Sept. 17, 2018. Musk had tweeted in October that the company employed 45,000 people. Musk had been sued for fraud and misleading investors about taking the company private. In his message, Musk noted that in the near future, Tesla's challenge would lie in developing vehicles and energy products that are attainable for mainstream customers. "We would not be where we are today without you", Musk wrote.

'Tesla has only been producing cars for about a decade and we're up against massive, entrenched competitors, ' he said.

The company has been struggling to be profitable its entire existence.

In October, Tesla reported third-quarter profits of $312 million.

Meanwhile, this is the second layoff that Tesla has announced in a span of about seven months. Musk credited the higher-priced Model 3 sales. Musk said it plans to begin production there of the Model 3 and a planned crossover by the year's end.

Tesla shares dipped dramatically on Friday, down 13 percent to $302.

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