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This morning, the following email was sent to all Tesla employees:
As we all know, last year was the toughest in Tesla's history. However, thanks to your efforts, 2018 was also the most successful year in Tesla's history: we delivered almost as many cars as we did in the last quarter and almost as many cars in the year last than in the previous one. years of Tesla's existence together! Model 3 has also become the best-selling premium vehicle in 2018 in the United States. It's really remarkable and something that few people thought possible a short time ago.
In our mission to accelerate the advent of sustainable transportation and energy, which is important for all life on Earth, we face an extremely difficult challenge: to make our cars, our batteries and our competitive solar products in terms of cost versus fossil fuels. Although we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about ten years and we are facing huge competitors. The net effect is that Tesla has to work much more than other manufacturers to survive while building affordable and sustainable products.
In the third quarter of last year, we were able to make a profit of 4%. Although small compared to most standards, I would still consider this to be our first significant benefit in 15 years since the creation of Tesla. However, this was partly due to the preferential sale of more expensive Model 3 variants in North America. In the fourth quarter, preliminary unaudited results indicate that we again achieved GAAP earnings, but lower than the third quarter. As this quarter, as in the third quarter, the shipping of higher-priced Model 3 variants (this time in Europe and Asia) will allow us, with great difficulty, effort and luck, to target a minimal profit.
However, starting in May, we will have to offer at least the mid-range Model 3 variant in all markets because we need to reach more customers who can afford to pay for our vehicles. In addition, we must continue to move towards the less expensive variants of Model 3. Currently, our most affordable offering is Mid-Range Model (264 miles) with sound and interior. upscale at $ 44,000. The need for cheaper variants of Model 3 becomes even greater on July 1, when the US tax credit drops again by half, making our car more expensive by $ 1,875, and at the end of the year, when it disappears completely.
Sorry for all these numbers, but I want to make sure you know all the facts and figures and understand that the way to go is very difficult. This is not new to us – we have always faced significant challenges – but that is the reality we face. Many companies can offer a better work-life balance because they are larger and more mature, or in less competitive sectors. Trying to make clean and affordable energy products on a large scale necessarily requires extreme effort and creativity, but to succeed in our mission, it is essential to ensure that the future is good. We must therefore do everything in our power to advance the cause.
As a result of the above, we unfortunately have no choice but to reduce the full-time workforce by about 7% (we increased by 30% last year, which is higher than we can support) and keep only the most critical employees and temporary workers. . Tesla will need to make these reductions while increasing the production rate of Model 3 and making many improvements to manufacturing engineering in the coming months. Larger volume and manufacturing design improvements are essential for Tesla to realize the economies of scale required to manufacture the standard range (220 miles), the standard $ 35,000 domestic interior model, and remain a viable business. There is no other way.
To those who leave, thank you for everything you have done to advance our mission. I am deeply grateful for your contributions to Tesla. We would not be where we are today without you.
For those who remain, while many challenges await us, I think we have the most exciting product roadmap of any consumer product company in the world. The complete self-driving, model Y, semi, truck and roadster side vehicle and Powerwall / pack and Solar Roof energy side are just the beginning.
I am honored to work with you.
Thank you for everything,
Elon
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