Jan. 18 (UPI) -- Tesla must cut 7 percent of its workforce in order to produce a Model 3 for the long-promised price of $35,000, CEO Elon Musk told company employees Friday.
In an email to workers, Musk said the base version Model 3 is critical because the federal tax credit will be cut in half July 1, upping the cost for each vehicle by $1,875.
"Starting around May, we will need to deliver at least the mid-range Model 3 variance in all markets, as we need to reach more customers who can afford our vehicles," Musk said. "Moreover, we need to continue making progress toward lower-priced variants of Model 3."
Right now, the cheapest Model 3 costs $44,000 and has a range of 264 miles. The Model 3 was first announced years ago as a $35,000 vehicle but Tesla has yet to produce one at that price point.
"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," Musk said. "There isn't any other way."
Musk said Tesla has to cut expenses and is doing so through its full-time workforce, while also retaining only the most critical contractors and temporary workers.
"To those departing, thank you for everything you have done to advance our mission," he said. "I am deeply grateful for your contributions to Tesla. We would not be where we are today without you."
Tesla remains focused on full self-driving technology, the development of the Model Y (a crossover version of the Model 3), a semi truck and Roadster II. The company is also developing a powerwall/pack and solar roof on the energy side.
Tesla trimmed other costs this week, including the referral program in which existing customers give new Tesla owners a code for six months of free supercharging. The program will end Feb. 1 because, Musk said, "It's adding too much cost to the cars, especially Model 3."
The Tesla customer referral program will end on Feb 1. If you want to refer a friend to buy a Tesla & give them 6 months of free Supercharging, please do so before then.- Elon Musk (@elonmusk) January 17, 2019