Tesla cut jobs because it made the Model 3 more affordable


Tesla Inc. said on Friday it would cut thousands of jobs to control costs because it plans to increase production of the crucial version of the Model 3 sedan, sending its shares down by 10%.

Companies, which have struggled to achieve long-term profitability and keep tight on spending, also said they expect fourth-quarter profit to be lower than the previous quarter.

Chief Executive Officer Elon Musk said the need for a cheaper version of Model 3 would be greater than in July, when US tax credits fell by half again, adding $ 1,875 to the car price tag, and again at the end of the year when it was completely gone.

Tax elimination of electric vehicles is gradually confronted with Tesla with the choice of raising prices at the risk of losing customers or cutting costs up to thousands of dollars per vehicle, a huge task for car makers.

Musk also faces a narrow window where his electric luxury vehicle enjoys a monopoly in the segments created and defined by Tesla. Over the next few years, established car makers plan to spend nearly $ 300 billion on electric vehicles and batteries.

Heritage luxury brands such as Audi and Porsche Volkswagen, Mercedes-Benz and BMW Daimler all plan new luxury electric vehicles.

Chinese startups such as Byton and NIO continue to advance with electric vehicles that are technically advanced, building China's aggressive support for cleaner cars. Most analysts expect China to become the world's largest electric vehicle market.

Musk said on Friday that the company would need to provide at least the Model 3 mid-range version in all markets starting around May, because it needs to reach more customers who are able to buy vehicles.

Michelle Krebs, executive analyst at Autotrader, said she expected this year to be a challenge for all automakers because the sales of new vehicles slowed.

"It will be very challenging for Tesla because it is trying hard to get more quarterly profits after owning one in the third quarter, and it is facing competition from competitors in the next few years," he said.

This billionaire entrepreneur has been under intense pressure to stabilize the production of Model 3, a car that was inaugurated in early 2016 for great excitement and is seen as important for the long-term sustainability of the company.

But Tesla has struggled to get Model 3 into the hands of customers, many of whom have been waiting since the beginning of 2016, and Musk said last year that Tesla had moved from "production hell to logistics shipping hell."

This is the second trimming of Tesla's work in seven months and comes just days after cutting U.S. prices. for all vehicles and failed quarterly deliveries from the mass-market sedan model-market.

In a memo to employees on Friday, Musk said 2018 was "the most challenging in Tesla's history," adding the company employed 30% more employees last year than more could be supported.

"I want to make sure you know all the facts and figures and understand that the road ahead is very difficult," Musk said.

"No other way."

Tesla sales benefit from a federal tax credit of $ 7,500 for electric vehicles throughout 2018, but full credit ends at the end of 2018, and new buyers will now only receive half that amount.

The company reported a profit of $ 311.5 million, or $ 1.75 per share, for the third quarter ended September 30, which Musk called the company's "first meaningful profit" since the company began.

For the fourth quarter, the average analyst estimated the company's net profit to be $ 216.92 million on a reported basis. Estimates shrank further in the first quarter to $ 62.80 million, according to data from Refinitiv.

"This quarter, as in Q3, shipping the Model 3 variant at a higher price (this time to Europe and Asia) is expected to enable us, with great difficulty, effort and a little luck, to target small profits," Musk said.

Musk, who often set a failed goal and deadline met by Tesla, surprised investors by fulfilling his promise to make the company profitable in the third quarter, only for the third time in 15 years.

The electric car maker said on Friday it would reduce the number of full-time employees by about 7 percent and only retain the most critical temps and contractors.

In June, Tesla said it would cut 9 percent of its workforce. Musk tweeted in October that the company employed 45,000 people.


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