Tesla to cut more than 3,000 jobs because cars ‘still too expensive’

Tesla is cutting more than 3,000 jobs, or 7% of its workforce, after experiencing a year its founder, Elon Musk, said was both its most challenging and most successful.

The chief executive of the electric car manufacturer told staff on Friday that “the road ahead is very difficult” because its products were not yet affordable for most people and it was up against a big incumbent industry.

The California-based company had a torrid 2018 as it struggled through production problems with its mass market” Model 3 car and had to pay out $40m over tweets Musk made about taking the firm into private ownership.

Musk said it had also been a good year because Tesla had sold almost as many cars in 2018 as it had in its entire history and the firm had made its first profit.

However, he said he had no choice but to reduce its global headcount by 7% as the company had grown by nearly a third last year, which was “more than we can support”. The company has not published its precise headcount but Musk gave a figure of 45,000 in October, implying 3,150 job losses.

In a company update, Musk said: “While we have made great progress, our products are still too expensive for most people. 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.”

Musk added that the cuts would fall at a time when the firm also needed to ramp up the speed with which it is building the Model 3.

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In an apparent nod to reports about overworked staff at the company’s plants, he wrote: “There are many companies that can offer a better work-life balance because they are larger and more mature or in industries that are not so voraciously competitive.”

He said the company, which has been criticised for only offering the priciest customisations of the Model 3, needed to make progress towards cheaper variants. The most affordable version of the car was still $44,000, he said.

Tesla will make a “tiny profit” for the fourth quarter of 2018, he said, suggesting it will be lower than the $312m profit in made in the third quarter.

The latest round of job cuts come on the back of the company cutting 9% of its workforce last summer.