Musk took to Twitter to defend the decision to cut staff
In May, Tesla posted first-quarter results showing the company made a record £523m ($710m) net loss after burning through a massive £549m ($745.4) cash pile attempting to ramp-up production of its highly-anticipated Model 3 sedan.
Billionaire chief executive Elon Musk said the job cuts are part of a simplification of Tesla’s management structure promised last month.
Mr Musk said, that a “difficult, but necessary” reorganisation was underway.
He said: “As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9 percent of our colleagues across the company.
“These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months.”
Elon Musk explained the cuts on Twitter
As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately 9 percent of our colleagues across the company.
Tesla’s profitability has been based on the firm hitting a 5,000 per week production target of its Model 3 sedans after facing initial production hiccups. Last week, Musk said the carmaker should achieve its target by the end of June.
Shares rose as much as 7 percent and are up 3.6 percent at $344.18.
Efraim Levy, analyst at CFRA Research says that profitability is just around the corner but it may not last long.
He said: “I don’t think if Tesla becomes profitable in Q3 and Q4, that will be sustainable because of ramping up of the production. The layoffs may help them to achieve profitability in the near-term but not sustain it.”
Musk’s statement in full
Musk with Grimes at the MET Gala
The question of profitability is a huge irritant to Mr Musk who launched a staggering attack on “bonehead” analysts daring to question the firm’s performance last month.
In a move that wiped £1.5 billion ($2 billion) from the firm’s value, CEO Elon Musk said questions about his firm’s record net loss were “So dry. They’re killing me.”
During a conference call with leading business analysts, Mr Musk interrupted a question on the firm’s capital requirements with “Excuse me, excuse me. Next, next. Boring bonehead questions are not cool. Next.”
When another analyst asked him about the problems facing production of the highly-anticipated and reasonably priced Model 3 electric car, there was a long pause, followed by: “We’re going to go to YouTube. Sorry, these questions are so dry. They’re killing me.”
Tesla will notify the affected workers this week and and although an exact number of job losses has not yet been confirmed a spokesman said it would reduce overall employment back to around 37,000 – roughly in line with numbers at the end of last year.