Tesla CEO Elon Musk sent employees a bad-news email on Friday, announcing a staff cut of “approximately 7 percent.”
The layoff follows a 9 percent cut last June, amid a broader restructuring effort.
The latest reorganization news was buried in an email in which Musk discussed the “voraciously competitive” industry where Tesla is working to stay afloat. Musk said that in addition to the 7 percent cut in full-time staff, only the “most critical temps and contractors” would stay on.
Tesla turned a profit in the third quarter of 2018, and Musk’s email suggested the company should see a profit again in Q4 — but a smaller one. Musk also said Tesla could be in the black for the first quarter of 2019 “with great difficulty, effort and some luck.”
While Musk mentioned Tesla’s solar and battery offerings in passing while discussing the company’s “mission of accelerating the advent of sustainable transport and energy,” the email was mostly focused on efforts to make the Model 3 more affordable and offer it to more customers.
Tesla faces significant headwinds in making the Model 3 a true mass-market vehicle. For one thing, the federal Investment Tax Credit available for Tesla vehicles has already been cut by half and will drop again this summer.
"The need for...lower priced variants of Model 3 becomes even greater on July 1, when the U.S. tax credit again drops [by] half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely," Musk wrote.
That quest for affordability echoes price cuts Tesla made to its residential solar systems in November, when the price for the typical homeowner dropped $2,000. Tesla Powerwall prices have gone in the opposite direction: The company increased the price for its energy storage systems twice in 2018.
But while Tesla’s made a big name for its energy storage business with record-breaking projects, the residential solar division at Tesla looks to be flagging. In December, Sunrun edged out the one-time leader. Allison Mond, a senior solar analyst with Wood Mackenzie Power & Renewables, said the company appears to be putting its focus elsewhere.
Tesla told Greentech Media that the layoffs will impact employees throughout the company, but declined to offer specifics on how that will impact the energy business.
Musk’s email, however, indicates the company is concentrating on its vehicles as it works to expand its presence in Europe and Asia, as well as to continue increasing sales in the U.S.
In the email, Musk hints at the intense work environment (one Musk imposes on himself, as well: in April of last year, he said he was sleeping on the factory floor to save time) and acknowledges that it will continue for the staff that remains to make it all happen.
“There are many companies that can offer a better work-life balance,” he wrote. “Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.”
As Eric Wesoff recently noted in a piece for GTM, 2018 brought numerous ups and downs for Tesla. This year will be an important one for the closely watched company, as it works to scale its new manufacturing plant in Shanghai and deliver cars and batteries across the globe.
While acknowledging the challenges ahead, Musk praised his company for having "the most exciting product roadmap of any consumer product company in the world." In addition to the Model 3, the Roadster, the coming Model Y and other vehicles in Tesla's lineup, Musk’s email mentioned the Powerwall battery and the Solar Roof ― although the latter continues to be a bit of a mystery.
