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]