Tesla is cutting thousands from its workforce as the company struggles to maintain profitability and provide cheaper cars to a larger market, CEO Elon Musk told employees Friday.
Tesla CEO Elon Musk announced the cuts, which will comprise about 7 percent of the electric car maker’s workforce, Friday in a company blog post that was sent to employees. Tesla shares fell 7.6 percent in pre-market trading after the announcement, according to Bloomberg.
Tesla’s slim profit margin shrunk even more from the third to the fourth quarter of 2018, but still remained positive, Musk said. (RELATED: Here’s How Elon Musk Landed Himself And Tesla In The Fed’s Doghouse)
“We face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels,” Musk said. “While we have made great progress, our products are still too expensive for most people.”
“We unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors,” Musk said. The cuts must come while increasing production of the electric sedan Model 3 and cutting its price from $44,000 to $35,000.
Tesla employed about 45,000 workers at the end of 2018, making the cuts come out to around 3,150 jobs, Bloomberg reports.
Tesla had a tumultuous 2018 under Musk’s leadership that resulted in Musk resigning as the company’s board chairman. Musk stepped down from the post as part of an agreement with the Securities and Exchange Commission (SEC).
The SEC sued Tesla for fraud after Musk announced on Twitter that he had financial backing and intended to take the company private. In a settlement with the SEC, Musk neither admitted to nor denied the allegations and also agreed to pay a $20 million fine.
News of the Tesla cuts comes a week after the space exploration company SpaceX, which Musk runs as CEO, announced it would make cuts of its own. Musk and company President Gwynne Shotwell told SpaceX employees Jan. 11 that the company would be laying off 10 percent of its roughly 6,400-employee workforce.
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