Tesla Slashes Workforce, Kills Referral Program in Ongoing Search for Cash

Steph Willems
by Steph Willems
tesla slashes workforce kills referral program in ongoing search for cash

The automaker may have worked out production bugs and finally turned a profit late last year, but 2019 is off to a rocky start for Tesla. In an email to employees Friday, CEO Elon Musk said he’ll thin the company’s full-time ranks by 7 percent, warning of a “very difficult” road ahead.

The news comes hot on the heels of a slew of cost-cutting measures, including the elimination of various trim configurations and this month’s culling of 75D base models — a move that leaves only the top-flight 100D versions of the Model S and X in Tesla’s stable. Thursday brought word of the scrapping of company’s long-running customer referral program, prompting tears in the Tesla-boosting blogosphere.

All of this throws Musk’s promise of a true “people’s car” by this summer into doubt.

In his email, following an introductory morale-boosting exercise, Musk laid the company’s financial position bare. The slim profit reached in the third quarter of 2018, he said, was only achieved by selling high-zoot variants of the Model 3.

“This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit,” he wrote.

“However, starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.”

All of that to say that boosting revenue isn’t enough. Cuts will need to be made to keep Tesla stable.

The company has “no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors,” Musk wrote. “Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.”

Without the cuts, Tesla’s hope of delivering on its promise of a $35,000 Model 3 — a variant which garnered praise as the Earth’s eventual savior during its 2016 launch — falls flat. Since the Model 3’s debut, Chevrolet and Nissan have come to dominate the low-priced EV field.

The $35k Model 3 (before tax incentives) was first marketed by Tesla 34 months ago. https://t.co/XjBnFOtZ7S

— Charley Grant (@CGrantWSJ) January 18, 2019

Musk said in October that a standard battery Model 3 boasting 220 miles of range and a $35k entry price was impossible, estimating its arrival within six months. It’s now looking like the base Model 3 might face another pushback.

As it ramps up Model 3 production at its Fremont, California assembly plant, Tesla broke ground earlier this month on its new Shanghai vehicle and battery plant — a plant which will require no shortage of funding. A trade dispute and China’s softening auto market also hit Tesla hard in the latter part of 2018.

As mentioned before, part of Musk’s “triage” approach to financial stabilization involves the jettisoning of the company’s perk-laden referral program, which Musk said is “adding too much cost to the cars, especially Model 3.” That program dies at the end of the month.

The Tesla customer referral program will end on Feb 1. If you want to refer a friend to buy a Tesla & give them 6 months of free Supercharging, please do so before then.

— Elon Musk (@elonmusk) January 17, 2019

[Images: Tesla]

Join the conversation
3 of 55 comments
  • Danio3834 Danio3834 on Jan 22, 2019

    Tesla should stick to being a high end boutique brand instead of trying to conquer the world with a "people's car". Regular automakers have a hard enough time keeping profits on conventional cars, and Tesla has the brand power to command a high price where they actually stand a chance to make some money. Forget the $35,000 M3, or even a

    • Vulpine Vulpine on Jan 22, 2019

      Tesla will most certainly build at least one batch of those "minimum" models, just to keep their promise. If anyone bothers to look back, you will find that Tesla made a similar promise for the Model S and yes, kept that promise for as long as sales held out. They quickly realized then that nearly every customer wants upgrade options so very few of the lowest-priced Model Ses actually sold. So they made the next higher model their base model, until those stopped selling. I expect that's one reason why they've now stopped selling the S-75.

  • Volvo Volvo on Jan 22, 2019

    @danio3834 Best comment I have seen on this subject. I agree. Be Porsche before they were absorbed into VW group.

  • Dukeisduke Why the hell doesn't Farley just resign? Why hasn't Bill Ford fired him? I lay all this at Farley's feet.
  • Dukeisduke I tried watching the livestream (I'm a MT+ subscriber), but after 15 minutes of jawing by the presenters, I got bored and turned it off. I may watch it this weekend, when I can fast forward through that stuff, to get to the reveal.
  • Dukeisduke Electric power steering, I assume. First-gen Chevy Cruzes can suffer from similar issues, usually traceable to a flaky battery negative cable, a $10 OEM part. Weird, huh?
  • Kwik_Shift Once 15 Minute Cities start to be rolled out, you won't be far enough away from home to worry about range anxiety.
  • Bobbysirhan I'd like to look at all of the numbers. The eager sheep don't seem too upset about the $1,800 delta over home charging, suggesting that the total cost is truly obscene. Even spending Biden bucks, I don't need $1,800 of them to buy enough gasoline to cover 15,000 miles a year. Aren't expensive EVs supposed to make up for their initial expense, planet raping resource requirements, and the child slaves in the cobalt mines by saving money on energy? Stupid is as stupid does.