Musk fires over 3,000 Tesla staff over 'tiny profits', Model 3 challenges

Musk fires over 3,000 Tesla staff over 'tiny profits', Model 3 challenges

After Elon Musk published a memo on Friday announcing plans to cut 7% of Tesla's workforce, one analyst said the electric vehicle maker is at an inflection point.

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

But the company grew its headcount by 30 percent in 2018, something Musk said was "more than we can support" on Friday. 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. The good news is that the company is making a major push to produce a cheaper Model 3 - though Musk says that the Model 3 was the best-selling premium vehicle in the U.S. past year, its starting price of $44,000 is "still too expensive for most people".

China's market regulator said on Friday that electric carmaker Tesla will recall over 14,000 Model S vehicles sold on the mainland to replace faulty airbags made by the now-defunct Japanese company Takata.

That quest for affordability echoes price cuts Tesla made to its residential solar systems in November, when the price for the typical homeowner dropped $2,000. But Musk warned that the road ahead would be "very hard".

In the letter, Musk brings up several numbers when describing the company's growth, including employee count.

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A Tesla Model 3 vehicle is displayed during a media preview at the Auto China 2018 motor show in Beijing, China April 25, 2018. He warned in May that Tesla would "lose money & die" if it shipped a $35,000 version of the sedan right away.

Musk said the layoffs were necessary because Tesla has to produce cheaper variants of the Model 3.

In a long and apparently very well documented statement sent via email to Tesla employees, Elon Musk advocates the need to lay-off a rather great number of people, around 3,000 of the 45,000 thousand it now employs.

Gas prices, however, have been inching closer to $2 per gallon as oil prices fall, which makes the hurdle for electric vehicle makers that much higher.

Tesla stock was down almost 11 percent Friday afternoon, but investment analysts were largely pleased with Musk's announcement, arguing that the cuts will leave Tesla better positioned for future profits. The company plans to begin production there of the Model 3 and a planned crossover by the year's end.

Tesla's layoffs mark the second shedding of workers in a matter of months. "There isn't any other way".

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