Skip to main content

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.

Editors' Recommendations

Ronan Glon
Ronan Glon is an American automotive and tech journalist based in southern France. As a long-time contributor to Digital…
Tesla will show its cyberpunk, Blade Runner-inspired pickup by the end of 2019
Tesla truck teaser

Update: The Tesla Cybertruck will debut Nov.21, Elon Musk has revealed.

Tesla has its work cut out for the coming years. It's still trying to meet demand for the Model 3, it recently introduced a crossover named Model Y, it's bringing its first semi truck to the market, and it has started working on the next-generation Roadster. Phew. The firm likes keeping busy, so it's also designing a pickup truck. Company co-founder and CEO Elon Musk previewed the model by publishing a dark teaser image on his Twitter account, and announced plans to unveil it by the end of 2019.

Read more
Alpine sale: Up to $160 off speakers and subs for your car
alpine speaker sale crutchfield march 2024 car and amp setup on table

If you’re looking to kit your car out with some superior speakers or a subwoofer, Crutchfield is the place to go today. Right now, there’s a huge sale on Alpine subwoofers and speakers with nearly 50 different items forming the sale. As there are so many options, the best idea is to hit the button below to see what’s around. If you don’t know where to start though, read on while we take you through some great items in the sale.

What to shop for in the Alpine sale
Buying the best aftermarket car speakers are important for anyone who spends a lot of time on the road and is currently dealing with a mediocre sound system. One good starting point in the Alpine sale is the 2-way speakers for $104 instead of $130. You get two 2-way speakers with a polypropylene/glass fiber/mica woofer with a specialized rubber surround. There’s a one-inch silk dome tweeter with speakers able to handle up to 80 watts RMS with 240 watts peak power. The grilles aren’t included but the factor ones should be fine for most purposes.

Read more
Mercedes to trial humanoid robots for ‘low-skill, repetitive, demanding’ jobs
Apptronik's Apollo robot at work in an auto plant.

Humanoid robots have been coming on leaps and bounds in recent years, and some major companies are starting to take note.

Mercedes-Benz, for example, has just entered into an agreement with Texas-based robotics specialist Apptronik to collaborate on identifying applications for highly advanced robots that the auto giant could deploy. The deal will involve a trial that will see Apptronik's Apollo humanoid robot work alongside Mercedes' human workers on the factory floor.

Read more