Bobby Yip | Reuters
Tesla Chief Executive Elon Musk stands on the podium as he attends a forum on startups in Hong Kong, China.
Tesla is cutting its full-time staff headcount by approximately 7 percent, as it ramps up production of its Model 3 sedans, CEO Elon Musk said Friday.
The announcement come on the back of various cost-cutting measures the company has made of late, as it looks to reduce the price of its products and boost margins.
Tesla shares fell almost 8 percent in premarket trade following the news.
In an email to employees, Musk notes that the company faces a "very difficult" road ahead in its long-term goal to sell affordable renewable energy products at scale, noting the company is younger than other players in the industry.
"Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months," Musk said in the company update.
"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," he added.
You can read the full text of Musk's note to employees here.
The exact number of employees that will be laid off as a result has not been disclosed, however Musk last revealed that Tesla had a staff count of 45,000 in an October tweet. If still true today, that would mean 3,150 layoffs.
Earlier this week, the company discontinued the cheapest versions of its Model S sedans and Model X SUVs. And Musk said on Thursday that the firm would also ditch its customer referral program, which rewarded perks likes six months of free charging, as it was "adding too much cost to the cars."
Musk on Friday said that Tesla faces "an extremely difficult challenge" in making its electric vehicles and solar products a competitive alternative to traditional vehicles and energy products that rely on fossil fuels.
"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," Musk said.
"Moreover, we need to continue making progress towards lower priced variants of Model 3."
The cheapest version of Tesla's Model 3 currently costs $44,000, and the company is looking to release a $35,000 version. Musk said in a CBS interview in December that the company was "not that far from being able to produce the $35,000 car," adding that it would "probably be ready in about five or six months."
In its last quarterly financial statement, the firm posted its first profit in two years, reporting a net profit of $311.5 million and $881 million in free cash flow.
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"In Q4, preliminary, unaudited results indicate that we again made a GAAP (generally accepted accounting principles) profit, but less than Q3," Musk said. "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."
The firm disappointed investors earlier this month after it announced it delivered 90,700 vehicles in the fourth quarter, lower than investors had expected. That figure could foreshadow the company's fourth-quarter results, which it's due to release early next month.
The automaker has faced pressure from a spate of big rivals in the industry, with companies like Ford, Nissan and General Motors committing to investments in the EV space and launching new vehicles in a challenge to Tesla.
Last year was a wild one in terms of news surrounding both Tesla and its boss. Musk's infamous U-turn on a tweet announcing he would take the company private eventually backfired, with the U.S. Securities and Exchange Commission landing both Tesla and Musk with respective $20 million fines.