Tesla Motors of Elon Musk’s electric car manufacturer announced on Friday that it was cutting the workforce by 7% in a push to keep Tesla Model 3 affordable for middle-income consumers.
This round of job cuts which follows an earlier downsizing announced in June comes as the envelope-pushing company faces pressure in its home market on prices from the phasing-out of a tax credit for electric car purchases. Elon Musk did not release an estimate of the employment hit but the company had 45,000 employees in October suggesting about 3150 would be cut.
Elon Musk who originally perceived of the Model 3 as an affordably priced option for customers who could not pay the lofty prices of its first two vehicles, said the action was needed if the company was to succeed in its mission of challenging conventional electric autos.
Musk said in a blog post
While we have made great progress, our products are still too expensive for most people. We need to continue making progress towards lower-priced variants of Model 3.
Tesla’s most affordable offering is currently a less endowed version of Model 3 at $44000, a car that sells for $59000 by enhancing some features. Tesla originally discussed a price tag of $35000 for the car.
Selling of Model 3 at a higher price has enhanced profitability at the expense of access to the vehicles’ intended market. Complicating matters further is the phasing down from $7500 per vehicle of a US tax credit to encourage more sales of the electric cars.
Automaker competitors such as Volkswagen and General Motors are introducing more affordable priced electric models, a dynamic made possible by their fleets of conventional autos including sports utility vehicles and pickup trucks which of course have wide profit margins.
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