19 Jan 2019

Elon Musk's Tesla to cut 3000 jobs as cars 'too expensive'

5:10 pm on 19 January 2019

Electric carmaker Tesla says it will cut its workforce by 7 percent after the "most challenging" year in its history.

Billionaire entrepreneur and founder of SpaceX Elon Musk speaks at the 68th International Astronautical Congress 2017 in Adelaide on September 29, 2017. 
Musk said his company SpaceX has begun serious work on the BFR Rocket as he plans an Interplanetary Transport System. / AFP PHOTO / PETER PARKS

Elon Musk says Tesla will need to produce more cars this year with a smaller, more efficient workforce. Photo: AFP

In an email to staff on the firm's website, founder Elon Musk said that growth had been strong.

But he added it was difficult to make Teslas with their new and developing technology as cheaply as conventional cars, and the firm's cars were still "too expensive for most people".

Tesla employs more than 45,000 people, indicating it will cut about 3000.

Shares in the car manufacturer opened more than 6 percent lower as trading began in the United States on Friday.

Mr Musk said 2018 was Tesla's "most successful" yet, in which it delivered almost as many cars as it had in all the previous years of its existence combined.

Tesla Model 3 at a charging station provided by the San Francisco startup Volta.

The mid-range Model 3 Tesla will need to reach more markets in 2019, Elon Musk says. Photo: AFP

However, while it ramped up production of its mid-market Model 3 car, Mr Musk said its products were too pricey for the average driver and its profits too low.

"This quarter will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit," he wrote.

"However, starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles.

"Moreover, we need to continue making progress towards lower priced variants of Model 3."

He said Tesla had "no choice" but to reduce fulltime employee headcount and retain "only the most critical temps and contractors".

He added the firm would need to make these cuts while "increasing the Model 3 production rate" and making many "manufacturing engineering improvements in the coming months".

It's been a tough few years for the electric carmaker and its high-profile founder.

The firm has repeatedly failed to meet its own production targets, leading many investors to bet against it.

Mr Musk was also caught up in several scandals, including being sued by the US Securities and Exchange Commission after tweeting that he planned to take Tesla private.

Some analysts have speculated that Tesla will turn the ship around this year, but earlier this month it fell short on quarterly deliveries of the Model 3.

It also had to cut prices in the US to offset lower green tax credits.

In his email, Mr Musk noted the firm was cutting the jobs after expanding its headcount by almost a third in 2018.

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

"The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products."


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