Shares in Tesla tumbled over $45 Friday to close at $302.26, down 12.97%, after CEO Elon Musk announced the company will layoff 3,000 employees.
Musk said the company grew 30% last year but is cutting 7% of current full-time workforce and will retain only the most critical temps and contractors. Musk said Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months. 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 $35,000 and still be a viable company according to Musk.
The federal government is phasing out tax credits for electric vehicles this year says Musk so it is critical for the company to build a lower-priced Tesla Model 3 sedan and reach more customers that can afford its vehicles.
The tone of Musk’s announcement shows that Tesla could have rough year ahead after being a darling of the auto and tech industry for the past several years.
Tesla said production in the fourth quarter grew to 86,555 vehicles, a record high.