Investing.com - Tesla (NASDAQ:TSLA) shares slumped in premarket trading Friday, after the electric car maker said it's cutting its full-time workforce by 7% to lower operating costs.
It will also retain "only the most critical temps and contractors", according to a memo to employees from CEO Elon Musk that was posted on the company's web site. The news was first reported by The Wall Street Journal.
Tesla shares, which had largely recovered from the stock market at the end of last year, fell 5% in premarket trade in response to the news.
The cuts are an effort by Tesla to cut the price and increase sales of its Model 3 sedan, the company's first mass-market product, CEO Elon Musk told employees. He said the company needed to keep the Model 3 available as federal tax breaks for its products are phased out over the course of this year.
“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 in the memo.