Tesla started building its Gigafactory 3 at Lingang, Shanghai earlier this month to locally make affordable cars for customers in the world's largest auto and electric vehicle market.
"S$3 tarting around May", Musk wrote, "we will need to deliver at least the midrange Model 3 variant in all markets". It also seemed to confirm fears of an excessively expensive production process that reached pace too late to take advantage of the vast market share Tesla now enjoys among EVs in the U.S. While it succeeded in scaling up output of its Model 3, the company missed analysts' production targets during the fourth quarter, and it's cut prices to partially make up for the halving of a US tax credit that's acted as a buyers' incentive.
Perhaps most notable in the letter, though, is Musk's discussion about Tesla's capability to make a profit.
Electric carmaker Tesla has said it will cut its workforce by 7% after the "most challenging" year in its history.
Tesla's layoffs mark the second shedding of workers in a matter of months. He added that Musk appears to be positioning Tesla to be a more "product diversified" company by offering more price points and selling more cars internationally. As a result, Musk said, profits in Q4 were smaller than in Q3. So, not only is Tesla in a position where it needs to figure out how to make the Model 3 less expensive, it has to do so with a diminishing USA tax credit that incentivizes buying one. But Musk warned that the road ahead would be "very hard".
Tesla's fourth quarter results have yet to be announced, but investors were disappointed earlier this month when the company revealed it delivered fewer cars than expected despite attempts to boost production.
Tesla is still aiming to offer a $35,000 version of the Model 3 with a range of 220 miles.
"Our products are too expensive for most people", Musk said in the memo to Tesla staff saying the company has to "work harder". The cuts will hopefully help Tesla's quest to increase Model 3 production and finally introduce the $35,000 Standard Range variant that has been talked about since the Model 3's inception.
Ives maintained his outperform rating on Tesla's stock (tsla).