Earlier today, Elon Musk announced that Tesla would be letting go of 7% of its workfoce. He wrote an open letter to all the employees (also available on Tesla’s website) stating the challenges the company faces and why lay-off is required.
Elon tells his employees that there are other companies can provide better work-life balance because of their large scale and different mode of operation. He writes:
Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.said Musk
Why is why, reducing the number of full-time employees in order to cut costs and increase profits seemed inevitable. Tesla however, will still hold on to their most critical temps and contractors.
The letter mentions how the company grew by 30% last year, which is quite more than what they can currently handle. In a tweet back in October, Elon mentioned that the company’s workforce grew to 45,000 people. Seven percent of this number implies over 3,000 would be asked to let go of their jobs.
Over the past year, Elon Musk had to deal with quite a lot of employee layoffs. Last year, during what he called “production hell”, he had to cut down 9% of his workforce to keep up with exhausting production demands. And just last week, it was announced that his rocket company – SpaceX will also be laying off 10% of its employees in order to get “leaner”.
Why a cheaper Model 3 is crucial
“Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels”.Elon writes discussing the difficulties of making an affordable Electric Vehicle. For all its cool tech and electric prowess, a Tesla is still a very expensive car. The most affordable Tesla is the Model 3, which starts off at $ 44,000. This is clearly more than the $ 35,000 price they promised when the launched the vehicle. “Tesla has only been producing cars for about a decade and 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,” he adds.
He writes about the need for making lower-priced Model 3s. Especially, with the new situation with the tax credits.
The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.
Tesla’s stocks plummet
The news was not received well on the stock market either. The company’s stocks plummeted by nearly 9% in the pre-market trading on the Nasdaq stock exchange. The company’s shares are currently going for $ 325.60 per share. Moreover, this volatility has become a recurring theme in the company’s stocks over the past year. The company’s shares nose-dived from $ 340 to $ 250 (approx) during the August-October period. This was due to Elon’s notorious tweets about taking the company private which caused pandemonium in the market. The SEC then slapped him with a $ 20 million fine. He was also asked to step down from the Chairman’s post for three years. But after the incident, the company’s stock once again soared to the $ 350 threshold by December. However, the stocks are once again on the decline.