CEO Elon Musk told workers about the job cuts Friday in a letter that Tesla posted online. The company will only retain the most critical temps and contractors, Musk said.
Must wrote in the letter that Tesla is "up against massive, entrenched competitors" and must work "much harder than other manufacturers to survive while building affordable, sustainable products."
"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."
Tesla has announced plans to reduce its full-time workforce by 7% as it works to increase Model 3 production and cut prices.
The layoffs follow a surprise profit for Tesla in the third quarter driven by solid sales of the Model 3. But Musk said Friday that unaudited results indicate Tesla will produce less profit in the fourth quarter.
"This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort, and some luck, to target a tiny profit," Musk wrote.
Tesla shares fell 8% in premarket trading.
Musk said the layoffs were necessary because Tesla has to produce cheaper variants of the Model 3.
The cheapest version of the carmakers' most affordable model currently sells for $44,000. The goal is to reduce the price to $35,000 this year.
"The road ahead is very difficult," Musk wrote in his letter. "This is not new for us — we have always faced significant challenges — but it is the reality we face."
Tesla has been burning cash while it attempts to ramp up production of the Model 3. In June 2018, the carmaker laid off 9% of its staff.