Tesla CEO Elon MuskElon Reeve MuskJoe Biden's Big Labor push not winning voters Elon Musk warns SpaceX employees of bankruptcy risk if Starship engine production doesn't increase: report Microsoft CEO Nadella sells off nearly 0 million in shares of the company MORE announced Friday in a company-wide memo that his company will lay off about 7 percent of its total workforce as a result of economic challenges.
In a letter shared with all employees and posted on Tesla's website, Musk pointed to the high cost of his vehicles as a barrier to reaching a larger segment of American consumers and a chief reason for the company's troubles.
"While we have made great progress, our products are still too expensive for most people," Musk told Tesla employees. "We will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles."
"As a result of the above, we unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors," he continued in the memo.
Further design and manufacturing improvements, he added, were necessary if the Tesla was to become a profitable sales model for the company.
"Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company," Musk said. "There isn't any other way."
Tesla recorded its first profitable quarter since 2016 in October after a troubled year for the company that saw Musk step down as its chairman over tweets he sent discussing a plan to take the company private that was never pursued.
Securities and Exchange Commission (SEC) regulators appointed two independent board members to Tesla in late December, while Musk and Tesla were both forced to pay a $20 million fine.
Musk also stepped down as the company's chairman, with the SEC hitting him for "reckless" and "false" statements about his company's stock prices.