Tesla Inc said on Friday it would cut thousands of jobs to rein in costs as it plans to increase production of lower-priced versions of its crucial Model 3 sedan, sending its shares down as much as 10 percent.
The company, which has struggled to achieve long-term profitability and keep a tight lid on expenses, also said it expects fourth-quarter profit to be lower than the preceding quarter.
Chief Executive Officer Elon Musk said the need for lower-priced versions of Model 3 will become even greater from July, when the U.S. tax credit again drops in half, adding $1,875 to the car’s price tag, and again at the end of the year when it goes away entirely.
The phase-out of the electric vehicle tax break confronts Tesla with the choice of raising prices at the risk of losing customers or slashing costs by thousands of dollars per vehicle, a herculean task for an automaker.
Musk also faces a narrowing window in which his electric luxury vehicles enjoy a monopoly in the segment that Tesla created and defined. Over the next several years, established automakers plan to spend nearly $300 billion on electric vehicles and batteries.
Legacy luxury brands such as Volkswagen’s Audi and Porsche, Daimler’s Mercedes-Benz and BMW all plan new luxury electric vehicles.
Chinese startups such as Byton and NIO are pushing ahead with technically advanced electric vehicles, building on China’s aggressive support for cleaner cars. Most analysts expect China will be the world’s largest electric vehicle market.
Musk said on Friday the company would need to deliver at least the mid-range Model 3 version in all markets starting around May, as it needs to reach more customers who can afford the vehicles.