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Tesla to lay off 7 percent of workforce

January 18, 2019

CEO Elon Musk said that the electric car maker plans to cut roughly 3,000 jobs, prompting another sharp dip in share prices. Tesla is struggling in the US as the government rolls back a tax credit for buyers.

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USA Auto l Tesla
Image: picture alliance/AP/D. Zalubowski

Tesla told its employees on Friday that it must cut 7 percent of its workforce. Shares of Tesla were down just over 9 percent for the day.

The company, which has struggled to hit its production and sales targets, also said it expects fourth-quarter profit to be lower than the previous quarter. 

Tesla's least expensive model right now is the $44,000 Model 3, and it needs to broaden its customer base to survive.

"Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels," CEO Elon Musk said in a letter to staff.

Elon Musk
Elon Musk struggles to make Tesla cars affordableImage: picture-alliance/AP/J. Raoux

"While we have made great progress, our products are still too expensive for most people."

Tesla had increased its payroll significantly to meet production goals. The company delivered more than 245,000 electric cars and SUVs last year, nearly as many as all previous years combined.

However it still fell far short of the goal it set itself nearly three years ago of manufacturing 500,000 vehicles for the year. 

Musk said in October that Tesla Inc., based in Palo Alto, California, had 45,000 employees. The 7 percent cut would mean that about 3,150 people will lose their jobs.

Tax incentive eliminated

The US government had put into place a $7,500 tax incentive for people to buy electric cars, but President Donald Trump and other Republicans consider the credit a waste of taxpayer money and want it eliminated.

That incentive was reduced to $3,750 this month and it will be eliminated by the end of the year.

Sen. John Barrasso, R-Wyo., the chairman of the Senate Environment and Public Works Committee who introduced legislation in October to abolish the tax credit, said it would save about $20 billion over the next 10 years.

He has argued the market for electric vehicles is already established and "no longer needs the crutch of government assistance."

Tesla Model 3
Tesla Model 3 had its price loweredImage: picture-alliance/Imaginechina//Dycj

To offset the loss of that tax incentive, Tesla this month cut the price on each of its three models by $2,000. But electric cars of all makes remain vastly more expensive than equivalent models powered by an internal combustion engine, at a time of relatively low oil and therefore gasoline/petroleum prices.

"Tesla has only been producing cars for about a decade and we're up against massive, entrenched competitors," Musk said Friday.

Tesla broke ground earlier this month for a factory in Shanghai, China,  its first outside the United States. The company plans to begin producing the Model 3 there.

av/msh (AP, Reuters)

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