Tesla to cut 7% of workforce amid tough profit outlook

Elon Musk's electric car manufacturer Tesla Motors announced Friday it was cutting its workforce by about seven percent in a push to keep the Model 3 affordable for middle-income consumers.

Shares plunged following the announcement, which also signaled a tough profit road ahead for Tesla.

The round of job cuts -- which follow 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.

Musk did not release an estimate of the employment hit but the company had 45,000 employees in October, suggesting about 3,150 would be cut.

Musk, who originally conceived of the Model 3 as a reasonably priced option for consumers who could not pay the lofty prices of its first two vehicles, said action was needed if the company was to succeed in its mission of challenging conventional autos.

"While we have made great progress, our products are still too expensive for most people," Musk said in a blog post announcing the layoffs.

"We need to continue making progress towards lower priced variants of Model 3."
"For most auto manufacturers, the cost-cutting would be received positively but in Tesla's case, investors start to second guess whether the real issue is demand."