Tesla Motors Inc. (TSLA) has announced that the company will cut around 9 percent of the workforce, in a 'difficult but necessary' reorganization exercise, according to CNBC.

Tesla to Fire 4,100 Employees

The development comes on the back of last month’s announcement by CEO Elon Musk of a thorough reorganization aimed at flattening the management structure of the company.

"To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel," Musk said in a letter to employees on Tuesday. "I also want to emphasize that we are making this hard decision now so that we never have to do this again."

Musk also tweeted the image of his leaked email to the staff, mentioning “Difficult, but necessary Tesla reorg underway.” Talking about the changing needs and priorities and justifying the layoff decision, Musk mentioned in his email that the company needed to decrease operating costs and to make profits.

Tesla currently has approximately 46,000 employees, including the 8,000 positions the company has added since the start of this year. It is now set to shed around 4,100 jobs. Even with the proposed job cuts, it will have more employees compared to the previous year. The job cuts will mostly impact salaried positions, while the hourly factory jobs, like those of production associates, are expected to remain unaffected by the development.

Market experts and analysts view the development as the company moving towards maturity and focusing on profitability which it has historically lacked. "There is a normal ebb and flow of hiring and firing in a business," CNBC quotes CFRA analyst Efraim Levy. He further added, "Nine percent is a big chunk to do at once, but there comes a time when a company grows up and they have to cut out the fat to become more efficient." Following the news of the layoff announcement, the stock price continued its third straight day of upward run on Tuesday indicating the positive reception of the development by the market.

Tesla has had a rough ride since the start of this year. It has suffered challenges in scaling up the production of its Model 3 sedan car which led to leading research firms downgrading the company and reducing the stock price targets, though situation has improved over the last month. (See also, Model 3 Production at 500 Cars/Day: Musk Email.)

It is still attempting to achieve the earlier stated target of producing 5,000 Model 3 cars a week. Many analysts opine that company will need to raise more cash by early 2019, while Musk continues to maintain that Tesla will become profitable in the third quarter. (See also, Tesla Needs $10B by 2020 to Sustain: Goldman Sachs.)

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