Tesla cuts thousands of jobs to face 'very difficult' road ahead

Tesla is bringing an early end to its popular customer referral program. Image Shutterstock

Tesla is bringing an early end to its popular customer referral program. Image Shutterstock

Tesla stock was down 7.5% on Friday morning, after CEO Elon Musk told his workforce that he's letting 7% of them go as the company struggles to deliver a lower-cost electric auto. It also seemed to confirm fears of an excessively expensive production process that reached pace too late to take advantage of the vast market share Tesla now enjoys among EVs in the U.S. Given the margin of error that could come from "phantom accounts", or from contract/non-full time employees who state that they work for Tesla, Musk is reasonably truthful in stating that Tesla grew by about 30% over the past year. And Tesla is facing a number of headwinds in the coming months. Musk wrote in a blog post that the Palo Alto, California-based company managed to eke out a profit in the final three months of 2018, though narrower than the hard-won third-quarter earnings it reported in October. These strong results were made possible in part by pent-up demand for the Model 3. 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. Then it's presumably on to making that $35k Model 3, which would certainly do a lot to bring more customers to the company. Using our data, we're able to cross-reference Musk's data with external data to see what's what.

That goal was announced in May of 2016 based on advance orders for its mid-range Model 3, which sells for 44,000 dollars.

Tesla laid off thousands of workers a year ago, too, as it struggled to scale up production of the Model 3.

"I want to make sure that you know all the facts and figures and understand that the road ahead is very hard", Musk said. He added that Musk appears to be positioning Tesla to be a more "product diversified" company by offering more price points and selling more cars internationally. We think Tesla needs to focus on getting that elusive $35,000 Model 3 out, first. Until the start of 2019, an American Tesla customer got a $7,500 tax credit. A 7% cut would involve laying off about 3,150 people. But Musk warned that the road ahead would be "very hard".

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

Musk has said the company needs to reach a volume of 5,000 Model 3s per week for five to six months before it can afford to sell the base, $35,000 version of the auto, which may have a shorter-range battery pack, no Autopilot, no glass roof, no power seats, and a non-leather interior.

Tesla has been making other cost-cutting moves too.

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