Tesla cuts workforce by 7 percent, ends referral program to trim costs

Tesla Model 3 Red
Tesla Motors

California-based Tesla is taking a number of measures to cut its operating costs and boost Model 3 production in the coming year. Company co-founder and CEO Elon Musk wrote a letter to announce Tesla is trimming about seven percent of its workforce, and he announced the end of the referral program that rewards owners who help the firm sell cars.

“We unfortunately have no choice but to reduce full-time employee headcount by approximately seven percent (we grew by 30 percent last year, which is more than we can support) and retain only the most critical temps and contractors,” Musk explained in the letter, which was sent to employees and posted on the company’s official blog. He added Tesla faces many challenges as it tries to make its lineup of electric premium cars cost-competitive with comparable gasoline-powered models made by bigger, better-established automakers. It’s more expensive to develop and build an electric powertrain than a straight-six engine and an automatic transmission, which gives competitors like BMW and Mercedes-Benz a clear pricing advantage.

The gradual phase-out of the federal tax incentives that new Tesla buyers are eligible for complicates the situation for the relatively young automaker. The full, $7,500 incentive expired in late 2018 as Tesla crossed the 200,000-car threshold. It will again drop in half to $1,875 on July 1, and it will completely expire at the end of 2019. This makes Tesla’s downward expansion into a more affordable price bracket a necessity. “Our products are still too expensive for most people,” Musk admitted in his letter.

As it trims its workforce, Tesla will need to increase production of the Model 3, its entry-level model, while making what its top executive referred to as many manufacturing engineering improvements. The company needs to make these changes in order to sustainably and profitably build the long-promised, $35,000 version of the Model 3 and reach more buyers in the United States and abroad. That’s a tall order. “The road ahead is very difficult,” the executive wrote.

Musk announced the end of the referral program on his personal Twitter account. Customers who want to take advantage of it need to place their order by February 1. In a follow-up tweet, Musk explained the program is coming to an end because “it’s adding too much cost to the cars, especially the Model 3.” He clarified that Tesla will not launch a similar program down the road.

The competition is heating up, too. Though Musk didn’t address this in his letter, Tesla’s rivals are preparing to fire back, and a number of electric models from bigger automakers are scheduled to hit the road in 2019. Audi will notably start delivering its electric E-Tron SUV, and Porsche will release a Model S-fighting sedan named Taycan before the end of the year. At the other end of the spectrum, Nissan released a new variant of the second-generation Leaf named e+ with up to 226 miles of range.


The Polestar 2, Sweden’s answer to the Tesla Model 3, begins taking shape

Volvo sister company Polestar has released a teaser image to give us our first look at the 2, its second model. Polestar tells us the 2 will arrive as a four-door fastback with a 400-hp electric powertrain and about 300 miles of range.

Tesla’s Dog Mode lets good Samaritans know that Fido’s A-OK

Tesla's latest over-the-air software update adds two features called Sentry Mode and Dog Mode. Sentry Mode records footage and alerts the owner if someone breaks in, while Dog Mode runs the A/C so owners can safely keep their dogs in their…

Report: Amazon and General Motors may invest in electric pickup company Rivian

General Motors and Amazon may invest between $1 billion to $2 billion for minority stakes in U.S. startup Rivian, an all-electric truck company, Reuters reports. Rivian introduced the R1T pickup at the 2018 Los Angeles Auto show.

Zero DS police edition electric motorcycle stops a Telsa Model S

A quiet Zero DS electric motorcycle police edition pulled over an also silent Telsa Model 3 in a Bay Area city recently. Zero electric motorcycles require no drivetrain maintenance and fuel costs are a fraction of gas-powered motorcycles.

The hottest of all Mini hatches is coming with a Batman-approved design

The Mini John Cooper Works GP concept first seen at the 2017 Frankfurt Motor Show will go into production in 2020, Mini has confirmed. The John Cooper Works GP is the ultimate performance version of the Mini Cooper.

Ford F-150 recall: Fault could cause vehicle to downshift into first gear

Ford is recalling 1.48 million F-150 vehicles over a potential fault that could cause it to suddenly downshift into first gear. The automaker said it's currently aware of five accidents related to the issue.

Volkswagen’s hot-rodded T-Roc R is ready to shred its tires to confetti

Volkswagen released a teaser sketch to preview a hot-rodded SUV named T-Roc R. Insiders suggest it will be closely related to the mighty Golf R, meaning it will pack a turbocharged, 2.0-liter four-cylinder engine rated at about 300…

Honda’s Urban EV is shaping up to be a high-tech, high-style electric city car

Honda will travel to the 2019 Geneva Auto Show to unveil a close-to-production prototype that previews an adorable, city-friendly electric car. The Urban EV will offer about 155 miles of range, and its interior is a tech lover's dream come…

Audi’s Geneva-bound Q4 E-Tron concept will give us a glimpse of the future

Audi has released a trio of teaser sketches to preview the Q4 E-Tron concept. Scheduled to make its debut at the 2019 Geneva Auto Show, the design study takes the form of an electric SUV with a muscular design and a tech-filled interior.

Rock out in the carpool lane with Singing Machine’s Carpool Karaoke microphone

Carpool Karaoke fans can count down the days till summer. That's when Singing Machine's Carpool Karaoke microphone will be available. Connect the Carpool Karaoke Mic to your car radio to make your next road trip a mobile karaoke party.

Bentley Bentayga Speed surpasses Lamborghini Urus as world’s fastest SUV

The Bentley Bentayga Speed has wrested the title of world's fastest SUV from its cousin, the Lamborghini Urus. But the Bentley is just 1 mph faster than the Lamborghini. It requires 626 horsepower to achieve that top speed.
Emerging Tech

With CabinSense, cars will soon know who’s riding in them and respond accordingly

What if your car could know who's riding in it and customize the entertainment and safety options accordingly? That’s what's promised by the new CabinSense in-car Occupancy Monitoring System.

General Motors cycles into a new market with its first-ever ebikes

When General Motors launched a public campaign last year to name its new ebike brand, many wondered if Bikey McBikeface might win out. But it didn't. Instead, it's called Arīv, and the two bikes are up for pre-order this week.
Product Review

The 2020 Volvo V60 Cross Country is a do-it-all Swedish army knife

Volvo laced up its smallest station wagon in hiking clothes to create the V60 Cross Country. It's a lifted, all-wheel drive wagon that laughs at icy roads while coddling its occupants. We travel to Sweden to try it out.