Tesla will reduce the number of full-time employees worldwide by 7%
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Tesla's executive director, Ilon Mask, wrote an expanded narrative letter to the company's employees explaining the reasons and planned actions on personnel matters.
Also, the company intends to retain only the most important temporary employees and contractors.
On the morning of January 18, 2019, the following email was sent to all Tesla employees.
As we all saw for ourselves, last year was the most difficult in the history of Tesla.
However, thanks to your efforts, the year 2018 was also the most successful year in Tesla history: in the last quarter of 2018 alone, we shipped almost as many cars as in the whole of 2017, and as many cars as in the whole last year were delivered. all together the previous years of Tesla!
In 2018, the Model 3 also became the best-selling premium car in the United States. This is indeed a very remarkable fact that refuted the opinions of those who recently considered it impossible.
Looking ahead, in our mission to accelerate the introduction of electric transport and the use of renewable energy, which is very important for all life on Earth, we are faced with an extremely difficult task: to make our developments - cars, batteries and solar panels competitive in price against products using antediluvian ( fossil fuel.
Although we have made great progress with you, our products are still too expensive for most customers. Tesla has been producing cars for only about ten years, and we alone stand against huge, ingrained competitors. To improve efficiency, Tesla must work much harder than other manufacturers in order to survive, creating affordable and well supported products.
In the third quarter of 2018, we were able to get 4% profit. Despite the small size of most standards, I would still consider this figure as our first significant profit in the 15 years since Tesla was created. However, this is in part the result of selling mostly more expensive Model 3 options in North America. Preliminary, unofficial results of 4Q2018 show that we again made GAAP profit, but less than in 3Q2018. In the fourth quarter, as in the third quarter, shipping more expensive options for Model 3 (this time to Europe and Asia), I hope, will allow us, with great difficulty, effort and some luck, but still get a tiny profit.
Nevertheless, starting around May 2019, we will need to ship the more affordable version of the Mid Range Model 3 to all markets, as we need to attract more customers who can afford our cars. Moreover, we need to continue to modernize the assembly process and reduce the cost of producing more affordable Model 3 options.
At the moment, our most affordable offer is the mid-range Model 3 version (264 miles \ 424 km) with premium sound filling and an interior cost of 44 thousand dollars. The need to supply cheaper versions of the Model 3 is even greater since July 1, 2018, when tax concessions for the purchase of electric cars in the US are halved, making our car $ 1875 more expensive, and by the end of the year, the opportunity to get even this benefit will disappear - for their cancellation.
Sorry, please, for all these numbers above, but I want to make sure that you know all these facts and data, and you also understand that the way forward will be very difficult.
This is all not new to us - we have always faced serious problems - but this is the harsh reality that we always face to face. There are many companies in the world that can offer a better balance between work and personal life, because they are larger and more developed, or belong to industries in which there are no competitors that are so insatiable in their competitiveness.
Attempting to create affordable, environmentally friendly energy products on an industrial scale necessarily requires extraordinary efforts and constant creativity, but success in our complex mission is crucial to ensuring a good future, so we must do everything possible to move our business forward ...
As a result of the above, we, unfortunately, have no choice but to reduce the number of full-time staff by about 7% (last year we grew by 30%, and now there are more of us than we can afford ) and retain only the most critical temporary staff and contractors.
Tesla should make these cuts as long as it is possible to further increase Model 3 production and make improvements in production and assembly technology in the coming months.
The increase in production and improvement of production technology are crucial for Tesla, in order to achieve further savings due to the growth in sales required for further production standard range Model 3 (220 miles \ 354 km), standard interior Model 3 for 35 thousand dollars, but remain a viable company.
There is no other way.
To those with whom we part, thanks for all that you have done to advance our mission.
I am deeply grateful for your contribution to Tesla. We would not be where we are now without you.
As for the remaining ones, although there are still many challenges ahead, I believe that we have the most exciting road map among all producers of consumer goods in the world.
A full-fledged autopilot, Model Y, Semi, Truck and Rodster from both the vehicle and Powerwall / pack and Solar Roof from the energy products side is just the beginning.
It is a great honor for me to work with you.
Thanks for everything,
ilon
Original letter
Company Update
January 18, 2019
This morning, the following email was sent to all Tesla employees:
As we all experienced first-hand, last year was the most challenging in Tesla’s history. However, thanks to your efforts, 2018 was also the most successful year in Tesla’s history: we delivered almost as many cars as we did in all of 2017 in the last quarter alone and nearly as many cars last year as we did in all the prior years of Tesla’s existence combined! Model 3 also became the best-selling premium vehicle of 2018 in the US. This is truly remarkable and something that few thought possible just a short time ago.
Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels. While we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.
In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
However, starting around May, 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. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.
Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult. This is not new for us – we have always faced significant challenges – but it is the reality we face. There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. 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.
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. 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 $35k and still be a viable company. There isn't any other way.
To those departing, thank you for everything you have done to advance our mission. I am deeply grateful for your contributions to Tesla. We would not be where we are today without you.
For those remaining, although there are many challenges ahead, I believe we have the most exciting product roadmap of any consumer product company in the world. Full self-driving, Model Y, Semi, Truck and Roadster on the vehicle side and Powerwall/pack and Solar Roof on the energy side are only the start.
I am honored to work alongside you.
Thanks for everything,
Elon
January 18, 2019
This morning, the following email was sent to all Tesla employees:
As we all experienced first-hand, last year was the most challenging in Tesla’s history. However, thanks to your efforts, 2018 was also the most successful year in Tesla’s history: we delivered almost as many cars as we did in all of 2017 in the last quarter alone and nearly as many cars last year as we did in all the prior years of Tesla’s existence combined! Model 3 also became the best-selling premium vehicle of 2018 in the US. This is truly remarkable and something that few thought possible just a short time ago.
Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels. While we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.
In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
However, starting around May, 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. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.
Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult. This is not new for us – we have always faced significant challenges – but it is the reality we face. There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. 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.
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. 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 $35k and still be a viable company. There isn't any other way.
To those departing, thank you for everything you have done to advance our mission. I am deeply grateful for your contributions to Tesla. We would not be where we are today without you.
For those remaining, although there are many challenges ahead, I believe we have the most exciting product roadmap of any consumer product company in the world. Full self-driving, Model Y, Semi, Truck and Roadster on the vehicle side and Powerwall/pack and Solar Roof on the energy side are only the start.
I am honored to work alongside you.
Thanks for everything,
Elon