Electric vehicle manufacturer Tesla will cut 7pc of its full-time workforce as the company plans to lower prices for its Model 3.
Tesla said the layoffs were needed to lower production costs ahead of further production ramp ups. The workforce expanded beyond what the company could afford after rising 30pc over the past year, Tesla said in a letter to employees on 18 January.
The decision will aid in cutting prices for its vehicles, including the lower priced variants of the Model 3 as tax credits expire in May. Currently, the US Federal government provides $3,750 toward a purchase of the Model S, Model X or Model 3. This credit will be halved starting in June and run out at the end of 2019.
Tesla earned its first profit in two years in the third quarter of 2018. Profits totaled $311.5mn in the quarter, reversing the $619mn loss a year earlier and an increase from the $22mn profit in the same quarter of 2016. Revenues climbed to $5.9bn from $2bn a year earlier.
Third quarter deliveries of the Model 3 rose to 56,065 vehicles, up from 222 a year earlier when the company was still in the initial phases of ramping up production.
Still, there are persistent investor concerns over the company's financial situation. Tesla held roughly $3bn in cash and cash equivalents at the end of the third quarter, down from $3.4bn a year earlier. Long-term debt and capital leases grew by 3pc to $9.7bn.
Tesla aims to charge $35,000 for its standard interior Model 3 (220 mile), which compares with the most affordable Model 3 (264 mile) variant at $44,000 currently. In order to produce the vehicle at those prices, Tesla will need to ramp up production and improve manufacturing design, according to the company.
