Tesla Is Cutting 7 Percent of Its Workforce To Reduce Model 3 Price (cnbc.com)

Tesla CEO Elon Musk announced today that the company would cut 7% of its workforce in order to cut costs as the company prepares to ramp up production and boost margins as they get closer to releasing the long-awaited $35,000 version of the Model 3. CNBC reports: Musk says Tesla faces "an extremely difficult challenge" in making their products a competitive alternative to traditional vehicles, adding that he expects Q4 profit to come in significantly lower than Q3. Five experts weigh in on whether it's a challenge Musk and Tesla can overcome:

- Oppenheimer managing director Colin Rusch agrees with Jed Dorsheimer on Tesla's job cuts, but isn't bullish on what they'll accomplish.
- Canaccord Genuity's Jed Dorsheimer thinks the workforce cut is just fine, calling it "clean-up" after the company's latest push to ramp up Model 3 production came with a wealth of new hires.
- "They're certainly in a better position than they were eight or nine months ago," says ROTH Capital's Craig Irwin. "Where we're going to see pressure on the stock today is the 'copy-paste' expectations of Q3 going through 2019 need to be reset."
- Needham's Raji Gil thinks that Tesla may have overestimated how many people can actually afford a high-end electric vehicle. "Clearly, in my mind, they have an issue with demand," says Rusch, " If you do the math, you have to conclude that 90 percent of the reservations that have been built up over the past couple of years are folks that wanted the standard battery version of the vehicle, which is $35,000."
- Westly Group founder Steve Westly loves where Elon Musk's company is right now, calling Tesla "the iPhone of electric vehicles," and saying they're well ahead of the game when it comes to a quickly-changing auto market.

Comments

Re:Maybe cut your terrible management?

[Rei]

So your view is that a company refining its production line so that it doesn't need as many workers should have - back when more work hours were needed per vehicle -.... just never have hired people? So, what... just wait until a production line is at its maximum efficiency before you actually produce anything, regardless of whether its gross margins were well positive long before that point?

I sure hope you're not in charge of managing capital for a company.

Re:Maybe cut your terrible management?

[Anonymous Coward]

Tesla had a massive layoff 9% in 2018 and another 7% today. What you say doesn't make any sense. A healthy company doesn't have massive layoffs. You are just a Musk fanboy. It might be a good idea to lay off people in order to save a dying company, but it wasn't because of "work hours needed per vehicle". It is the oldest trick that companies pull: layoffs to push the short term margins up to keep the stock price high and the company solvent. Musk thought he could use automation instead of people, because he was the smartest guy in the room, that is why he bought Tesla, but it didn't work out, so now he is stuck with expensive people. The other warning sign is all the executives leaving with their stock options on the table.

Electric Cars Need a Tax Credit

[SmaryJerry]

Electric is the future for a clean environment. We absolutely need a new tax credit to keep manufacturers producing and selling more electric cars. China is years ahead of the U.S. is solar already and will end their dependence on fossil fuels much sooner than the U.S. If the U.S. doesn't catch up now it will be left with a failing economy and dying earth.

Re:This doesn't make sense. And I am a Tesla fan.

[tomhath]

The market for large luxury cars is too small to be profitable. Tesla kept bragging how they were the leader in that niche, but they were only the leader because other manufacturers had abandoned it.

Now Tesla needs to make cars at a much lower price point. But they are being eaten by fixed costs in a low profit margin market.

Re:$35k for a car that should cost $25k

[apoc.famine]

You've missed a massive cost sink for ICE cars: Maintenance.

I've now got a few friends with EVs, and they don't really do maintenance. Rotate the tires every now and then, add some washer fluid, and that's about it.

EVs don't have engines, radiators, exhaust systems, or transmissions, and the regenerative braking is extending brake life to 100k+ miles. They are seriously simplified vehicles, and those cost savings just go up with time, when ICE parts would be starting to near their end of life.

I've got a 14 year old car which has always been relatively cheap, but I know that in the next few years I need to drop many thousands of dollars into preventative maintenance that I wouldn't have to put into an EV. I need to fix the heat shield, drop a couple grand into the exhaust, new plugs and wires, a radiator flush, new brakes, etc. etc. And that's what I know. I don't know exactly how good the engine, coolant, and transmission systems are.

I'd happily take none of those but a scheduled battery change every 8-10 years.