Tesla is preparing to cut its workforce by about 7%, and letting go most of its contractors or temporary workers, while increasing production.
In a letter to employees, Tesla CEO Elon Musk describes 2018 as the most challenging as well as the most successful year in the company’s history.
“As we all experienced first-hand, last year was the most challenging in Tesla’s history. However, thanks to your efforts, 2018 was also the most successful year in Tesla’s history: we delivered almost as many cars as we did in all of 2017 in the last quarter alone and nearly as many cars last year as we did in all the prior years of Tesla’s existence combined. Model 3 also became the best-selling premium vehicle of 2018 in the US. This is truly remarkable and something that few thought possible just a short time ago.”
He outlines some of the challenges ahead: to make cars, batteries and solar products cost-competitive with fossil fuels.
“Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors,” Musk writes. “The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.”
The company made a 4% profit in the third quarter of 2017, and Musk hopes it will be able to make a small profit again in the fourth quarter.
However, the need to produce more cost-effective vehicles means the company needs to cut costs, Musk adds.
“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.
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.
“Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company. There isn’t any other way.”