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?

[chemish]

This has nothing to do with mis-management. I believe every large company with a large workforce needs to go through and cut 5% or so every now and then. It gives them an easy chance to cut the bottom performers as well as evaluate positions that might be unneeded now. Even companies that are hiring still fire people because the needs of the company change over time with a company like this.

Re:7% cuts at Tesla...

[Rei]

Tesla dramatically, then laid off ~9% in Q2 (and in Q3 posted a hugely-expectations-beating ER). After Q2, the company steadily expanded by an additional 30%, then now is laying off 7% in Q1. Is this what you call a collapsing company?

A company's needs change over time. The faster the company grows, the more rapidly its needs change. Open new lines and facilities? You need to hire people. Make those lines more efficient and automated? Well... I guess the "nice" option would be to keep people around that you don't need. But that's not the economically efficient way.

SpaceX is a great case. SpaceX has been growing very rapidly. They got good at really churning out Falcon 9s - a couple a month. Now, though... what's the point? They're reusing their rockets; they don't need nearly as many of them. Now they're mainly just manufacturing the (much smaller) upper stages, with only the occasional lower stage. What's your plan... should they just keep producing at the same rate for the heck of it? Even though they plan to retire Falcon 9 once BFR is fully operational?

Layoffs suck. There's no question about that. I was once laid off; I know what it's like personally. But layoffs are also the most efficient way to run a business, which is why they're a normal business practice.