Things do not look too good for the auto industry. After Jaguar Land Rover and Ford, Tesla has announced that it plans to reduce about 7 percent of its workforce. Tesla currently employees about 45,000 workers and the move is likely to affect about 3,150 of them.
The job cut is said to be step taken in a bid to increase the production of Model 3 and bring down its cost. The cheapest version of the Model 3 currently sells for about $45,000 and Tesla plans to bring down the figure to $35,000.
The job cuts were announced by CEO Elon Musk on Friday, January 18, through a letter that the company also posted online. He said that the Palo Alto-based company was facing "an extremely difficult challenge" and had no option other than letting a few employees go.
"We unfortunately have no choice. There isn't any other way," Musk said in the letter, adding that Tesla would retain only the most important contractors and temporary workers. "Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months," he explained in the letter.
"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."
Musk then thanked the departing employees for their work while telling those remaining that the coming months would be challenging for the brand. "I am honored to work alongside you," Musk concluded.
Following the announcement, shares of Tesla dived 13 percent in Friday trading.
Meanwhile, this is the second layoff that Tesla has announced in a span of about seven months. In June 2018, the company announced that it would lay off 9 percent of its workforce to reduce costs and become profitable. About 4,100 employees were reportedly shown the door at the time.
Explaining the move in a statement on Twitter, Musk had said that Tesla had never made annual profits since it was founded on July 1, 2003, which proves that profit is not the only motivational factor. But the expansion of the company in the last 14 years has led to "some duplication of job roles and some job functions that, while they made sense in the past, are difficult to justify today," he added.
While Musk may have tried to justify the decision and even thanked the remaining employees, those laid off evidently weren't pleased. The employees said that the decision came as a shock to them as Musk had never hinted at future job cuts, despite speaking of how the company will have to restructure its operations to become profitable.
A former energy salesperson, on the condition of anonymity, told Business Insider at the time that her team received a vague email at 1 am, which asked them to clear four hours in their day's schedule for a video conference. While the employees assumed it to be just another meeting, they realized it was, in fact, a conference call with the human resources department and the company's director of energy sales Brent Baldwin.
It was during this conference call that about 250 employees were told they would be let go. Baldwin reportedly also apologised as some of these employees who had even achieved their targets.