- Tesla is cutting 7% of its full-time employees in order to maintain profitability while lowering the price of Model 3
- Investors are placing more importance on the company’s bottom line, after years of serial losses
CEO Elon Musk let employees know in an email stating:
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” Musk said. “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.”
Tesla’s (TSLA) Model 3 sedan is currently their cheapest version and selling for roughly $50,000, before any discounts. Musk has stated that the company wants to release a $35,000 car for the mass market consumer. He himself thinks this $35,000 version of the Model 3 will be ready sometime in mid-2019. The company also discontinued the entry level versions of Model S sedan and Model X SUV in January 2019.
With debt totaling more than $11B and a cash balance less than $3B, Tesla is feeling pressure from investors who are now starting to question when the company will turn a consistent profit. It’s widely expected that the company will tap the debt or equity markets in the near future to continue funding operations and expansion into other markets such as China.
Article by: Mick Ross
Mick is currently a full-time investor and formerly a buy-side analyst (2yrs) covering healthcare companies. Before that, he was a salesperson at a bulge-bracket firm, based in Dallas, Texas. Mick blogs to clarify and synthesize his investment thought process and to elicit feedback; additionally he likes to connect with other investors and swap ideas.