Musk Backslides on Profit Every Quarter Pledge, Will Cut 7% of Workforce

Grimes & Banks

"Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless we must do everything we can".

Musk's leadership has been under fire in recent months, after the billionaire was hit with a lawsuit from the Securities and Exchange Commission over tweets in which he made comments about securing funding to take Tesla private at $420 a share. Given the margin of error that could come from "phantom accounts", or from contract/non-full time employees who state that they work for Tesla, Musk is reasonably truthful in stating that Tesla grew by about 30% over the past year.

Tesla posted a $311 million quarterly profit in October, only its third profitable quarter in eight years as a public company. Musk touted the results as a "historic quarter" but stressed in a letter to investors that sufficient profitability of the Model 3 was "critical to make our business sustainable".

Mr Musk said the company is on target to report a GAAP profit in its fourth quarter, but less than the previous three-month period.

Tesla now sells pricier Mid Range and Long Range models with 260 and 310 miles of range, respectively.

The plant is expected to produce about 3,000 Model 3 vehicles a week in the initial phase, and will ramp up output to 500,000 per year when it becomes fully operational, Tesla said in a statement. In a letter to employees, CEO Elon Musk wrote that its electric vehicles were "still too expensive for most people", and called the road ahead "very hard".

Meanwhile, the U.S. federal government is phasing out subsidies for the Model 3. For one thing, the federal Investment Tax Credit available for Tesla vehicles has already been cut by half and will drop again this summer. Assuming that's still the case, a 7 percent cut would be about 3,150 workers.

It is expected that a locally produced Tesla auto, with reductions in manufacturing and logistics costs on top of the exempted import tariffs, would cost as little as 300,000 yuan - a price level that could prove attractive to thousands of mainland buyers.

I want to make sure that you know all the facts and figures and understand that the road ahead is very hard.

"The safety of our customers is paramount and we are taking this action even though there have been no airbag ruptures or other related incidents in any Tesla vehicles".

Falling to about $322 per share on an abrupt move that will affect several thousand employees, Tesla stock (ticker: TSLA) showed that neither Tesla nor its fans can yet relax.



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