Tesla (TSLA) - Get Report tumbled Friday after the clean energy carmaker said it will cut around 7% of its workforce, adding that fourth quarter profits will likely come in lower than in the previous three-month period.
The stock lost 13% to close at $302.26 after Tesla said it will post a GAAP-reported profit for the three months ending in December, but cautioned that number will be less than the $312 million it posted for the third quarter. the automaker also said it would ramp up Model 3 production ahead of a scheduled reduction in U.S. tax credits on July 1.
"Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months," CEO Elon Musk said in a company blogpost. "Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company. There isn't any other way."
Musk also noted that, while fourth quarter deliveries were "almost as many cars as we did in all of 2017", the group still needed to reduce prices in order to make products that were "cost-competitive with fossil fuels."
"Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k," Musk said. "The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely."
Musk also said that Tesla could post a small fourth quarter profit -- "with great difficulty, effort and some luck" -- thanks to accelerated shipments of higher priced Model 3 variants to European and Asian markets.
(This article has been updated.)