Tesla has announced an increase of its electric vehicle fast-charging rates, alongside business-wide staffing cuts, to reduce costs and raise revenue as it works to meet the demands of a wider electric vehicle market.
CEO and founder Elon Musk said late last week that 7 per cent of Tesla’s full-time staff and all non-critical temporary staff and contractors would be cut, to help the company to deliver a cheaper version of its mass-market Model 3 EVs.
Separately, the company said in an emailed statement that it was raising the cost of its Supercharging network to “reflect differences in local electricity costs and site usage,” while assuring customers that profits were not behind the increase.
“As our fleet grows, we continue to open new Supercharger locations weekly so more drivers can travel long distances at a fraction of the cost of gasoline and with zero emissions. As has always been the case, Supercharging is not meant to be a profit center for Tesla,” Tesla wrote.
For Australians, the increase in charging rate is jumping from 35 cents to 47 cents (AUD) per kilowatt-hour – which will still mean only $A47 to “fill” a 100D Model S or X.
The range of either model is above 600km (NEDC) – still around $10 cheaper if one were to compare 500km range against a 10L/km ICE car paying $1.15 per litre of fuel (which would be $A57 – the average fuel consumption of an Aussie car in 2016 being 10.6L/km).
The increase follows an announcement last week that it would suspend its 6 months of free charging through its referral program, in order to enable the EV maker to achieve its goal of producing a Model 3 priced at $US35,000.
Which brings us to the reason behind the job cuts – which Musk says is “to continue making progress towards lower priced variants of Model 3”.
According to a letter from Elon Musk written to staff that was made public by CNBC on Friday (US time), the EV maker still needs to reduce costs in order to reach all markets (in particular those not able to afford the premium price of Tesla’s higher spec’d models) – even despite finally chalking up a profit in Q3 2018.
“Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels,” he said.
“While we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.”
While the CEO anticipates profit will follow for Q4 (once figures are audited), he says that it is not enough, and goes on to explain the numbers behind the staff cuts.
“Starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress towards lower priced variants of Model 3.
“Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. 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.”
Tesla is a relatively new company compared to auto giants like Ford. Musk goes on to explain, “There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive.”
“Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.
“As a result of the above, we unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors.
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.
“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.”