Tesla Motors announced it will cut its workforce by 7 percent, which equals to over 3,000 jobs, in an email sent to all of its employees in its bid to limit spending and make way for the cheaper versions of the Model 3.
The announcement caused Tesla’s share price to fell by as much as 8.4 percent before the start of regular U.S. trading, according to Bloomberg.
“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”, the company’s email read.
This is the second time Tesla is laying off employees. Last June, it dismissed 9 percent of its workforce, although it started hiring people on an increased rate shortly after to help ramp-up production of the Model 3.
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” the company added. “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.”
The Palo Alto-based manufacturer also acknowledged the need to launch at least the mid-range Model 3 in all markets by May of this year in order to reach more customers.
“We’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.”