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Tesla Plans to Lay Off Employees to Boost Profitability

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Tesla, Inc. (TSLA - Free Report) has made the announcement to downsize its workforce by around 9% to reduce expenses. This will also aid it to become sustainably profitable without compromising on its Model 3 sedan production goals. Per Reuters, this layoff decision is in sync with the carmaker’s strategy to simplify its management structure.

The chief executive officer, Elon Musk informed that the job cuts mostly include the salaried staff and this won’t affect the workers in the production assembly lines. In other words, this downsizing will not impact the ability of the company to achieve the Model 3 production target in near future.

Albeit rising sales, Tesla remains a loss-making company. The loss is expected due to significant investments made toward developing new vehicles and technologies along with the establishment of a retail network. It is expected that the company may find it difficult to achieve sustained net profits until Model 3 enters full-scale production. The latest move to cut down employment is in sync with the company’s efforts to lower costs and become profitable without backtracking from Model 3 production goals.

Over the past six months, shares of Tesla have outperformed the industry it belongs to. Over this time period, shares of the company have gained 1.1% while the industry declined 0.4%.

Currently, Tesla carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few other top-ranked stocks in the auto space are Oshkosh Corporation (OSK - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Ferrari N.V. (RACE - Free Report) . While both Oshkosh and Allison Transmission Holdings sport a Zacks Rank # 1, Ferrari has a Zacks Rank # 2.

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 12.2% over the past year.

Allison Transmission Holdings has an expected long-term growth rate of 10%. Over the past year, shares of the company have gained 11.1%.

Ferrari has an expected long-term growth rate of 17.3%. Over the past year, shares of the company have gained 59%.

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