Tesla's chief executive Elon Musk on Friday said that the company would be cutting its staff by about 7 per cent amid "very difficult" trading conditions.
The electric car and solar panel maker notified its employees about the staff cuts and other plans in an email posted on Tesla's website.
Mr Musk said Tesla hopes to post a "tiny profit" in the current quarter but a 30 per cent expansion in its workforce last year was more than it can support.
Tesla's shares tumbled earlier this month after it cut vehicle prices by $2,000 and announced fourth-quarter sales figures that fell short of Wall Street estimates.
"Our products are too expensive for most people," Mr Musk said in the memo to Tesla staff. saying the company has to "work harder".
"Tesla has only been producing cars for about a decade and we're up against massive, entrenched competitors," he said.
Mr Musk said in a tweet in October, last year, that Tesla, based in Palo Alto, California, had 45,000 employees. A 7 per cent cut would involve laying off about 3,150 people.
"We unfortunately have no choice but to reduce full-time employee headcount by approximately 7 per cent ... and retain only the most critical temps and contractors," he said.
The company says it delivered more than 245,000 electric cars and SUVs last year, nearly as many as all previous years combined. But its 2018 production fell far short of a goal set nearly three years ago of manufacturing 500,000 vehicles for the year. That goal was announced in May of 2016 based on advance orders for its mid-range Model 3, which Mr Musk said sells for $44,000.
Mr Musk said Tesla plans to ramp up production of the Model 3, "as we need to reach more customers who can afford our vehicles."
"Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity," he said in the memo, "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."
Tesla broke ground earlier this month for a factory in Shanghai, its first outside the US. Mr Musk said it plans to begin production there of the Model 3 and a planned crossover by the year's end.
Tesla and other global automakers including General Motors, Volkswagen and Nissan are pouring billions of dollars into manufacturing electric vehicles in China.