Tesla Inc.'s (TSLA) 7% headcount cut is aimed at maintaining profit margins for its lower-priced cars. 

But producing those cars is another issue. 

"We are concerned that the company may not successfully produce its Standard Battery version in time in order to compensate for a potential drop in demand for its high-end vehicles," wrote Neddham & Co. analyst Rajvindra Gill in a note out Tuesday morning. He said, "Throughout 2018, we believe Tesla rapidly depleted its high-end backlog of Model 3 orders." As Tesla switches its U.S. focus to lower-priced 'mass market' vehicles, "we could see a steep decline in Model 3 orders either in 1Q19/2Q19 as we wait for the standard battery to become available." 

Even with the cost savings that come with a 7% slimmer workforce, Gill lowered his earnings-per-share estimates on Tesla for 2019 and 2020, on the back of production risks to the cheaper models, and the reality that those models will now account for a far greater portion of Tesla's revenue. He revised down his EPS estimates for the full year of 2019 to $4.30 from $4.76. His 2020 EPS estimate fell to $8.25 from $8.47. 

Musk warned several days ago that Tesla could achieve a small profit in the first quarter of 2019 "with great difficulty, effort and some luck." 

Tesla will have to sell the cheaper models in huge bulk, which would require it to meaningfully limit battery production snafu's, in order to achieve a net income result satisfactory to investors. Even with high volumes -- should Tesla be able to achieve those -- gross margins will likely take a hit, as the lower priced cars won't offset the headcount reduction. Gill lowered his gross margin estimate by 80 basis points to 19.6%. 

Lower priced cars are seen by many analysts to be a very likely cause of lower gross margins for Tesla. In early January, RBC Capital Markets analyst Joseph Spak cut his price target on the electric car maker to $290 from $340 a share in part because of lower priced cars. Cowen & Co. analyst Jeffrey Osborne cut his price target to $200 from $250 on Jan. 18. 

Tesla shares closed down 1.11%, to $298.92 a share Tuesday.