Financial Crunch Looms Over Tesla

Tesla Inc. to face the financial crunch as Model 3- the new electric vehicle costing $35,000 approximately, lands in production hell.

Financial Crunch Looms Over Tesla
Tesla Employees To Face 9% Layoff!

Everybody loves Tesla, isn’t it? The uniquity that Tesla cars possess that too with affordable price tags is unmatchable. With its inception in 2003, Tesla has raised the bar of electric car manufacturing. Ranging from boutique startup models to high-end models, Tesla has announced its intentions of providing electric alternatives to its luxurious rivals. The question arises here that if everything is working with so perfection then why the news of Tesla’s bankruptcy is circulating?

A group of engineer keen to prove smooth acceleration, zero emission and instant torque offered by electric cars, launched Tesla in 2003.  Marc Tarpenning and Martin Eberhard financed the company during its infancy until Elon Musk’s involvement began in the year 2004. Musk became CEO of the company in 2008 and continues to hold the reins in present date. Roadster was the first car launched by Tesla. It did not fare well due to some calibration glitches. With the launch of Model S, Tesla introduced potentials of the electric car to the world giving tough competition to luxury end cars like Mercedes, Jaguar, and BMW. Initially, Model S was launched with a 40, 60 & 85 kWh option. Now it has upgraded to 70 kWh and offers a 90 kWh all-wheel drive and 90 kWh, rear-drive model.

Since the starting price of Model S burned a hole of $71,000 in the pockets of consumers, Model 3 comes into play. Tesla has been facing issues to meet the production targets for the Model 3. This, in turn, drew all sorts of negative attention towards the company, after which the company’s stock price saw a drop. Speculations were made that eventually the company might go bankrupt.

Elon Musk has his hopes pinned on Model 3. According to him, Model 3 will get the company on shore, relieving it of the financial crisis it has been facing. The problems of Tesla do no end here. Tesla has decided to lay off 9% workforce. The employees were informed via email on Tuesday about lay off targeting mostly salaried positions. Tesla added approximately 8,000 jobs at the start of the year and it currently employs 46,000 workers. It will shed roughly 4,100 jobs.

Tesla CEO, Elon Musk, had warned the company around mid-May that company might go a ‘thorough reorganization’ and it would rearrange its management structure. Here is the full memo released by Musk, “To ensure that Tesla is well prepared for the future, we have been undertaking a thorough reorganization of our company. As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission.

To be clear, we will continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development.”

He further clarified that profit is certainly not the motive behind this layoff and it is a normal ebb and flow of hiring and firing in a business. Meanwhile, some analysts see a ray of hope for Tesla. They think that Tesla can achieve gross margins of 25% on the Model 3.

Despite of work reduction announcement done on Tuesday, Tesla plans to hire more workforce now than it did at the end of 2017.