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Tesla to slash 7 percent of its workforce, CEO Elon Musk says

The CEO says the cuts are related to challenges with the Model 3 last year.

Tesla will also keep only the "most critical temps and contractors," according to Elon Musk.
Nick Miotke/Roadshow

Tesla will cut its full-time employees by around 7 percent, CEO Elon Musk said Friday.

The decision comes after the company workforce grew by 30 percent in 2018, "which is more than we can support," Musk said in an email sent to all employees.

Aside from the employee reduction, the company will retain "only the most critical temps and contractors," he said.

Musk hailed 2018 as Tesla's most challenging year but "also the most successful," due to the launch of the Model 3 -- its first lower-cost electric vehicle (EV).

He highlighted the company's 4 percent third-quarter profit and said Tesla expects a smaller one for the fourth quarter, pointing to the higher-priced Model 3 variants in the US market as the cause.

"While we have made great progress, our products are still too expensive for most people," he said.

Musk wants to get the Model 3 to every market around May "to reach more customers who can afford our vehicles" -- a target the company's hinted at previously. He noted that its vehicles will get even more expensive when the US tax credit on EVs is halved on July 1 and eliminated at the end of 2019.

"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 said in the email.

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Earlier this month, the company broke ground on a Tesla Gigafactory in Shanghai where it plans to produce "affordable versions" of the Model 3 and Model Y for the Chinese market.

Word of the cuts comes a day after Musk revealed that Tesla's referral program, which offered six months of free Supercharging, will end on Feb. 1.

A Tesla spokesperson referred back to Musk's email in lieu of further comment.

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