"The road ahead is very hard", Musk wrote in his letter.
Tesla announced Friday that it is reducing its workforce by 7 percent, a cost-cutting measure created to help the company make its Model 3 sedan more accessible in the mass market. "There isn't any other way".
The firm employs more than 45,000 people now meaning it will lay off over 3,000. In a public letter to employees, Musk also said the company will only keep the most critical temps and contractors.
Musk has said the company needs to reach a volume of 5,000 Model 3s per week for five to six months before it can afford to sell the base, $35,000 version of the auto, which may have a shorter-range battery pack, no Autopilot, no glass roof, no power seats, and a non-leather interior. He has promised a $35,000 vehicle to consumers, but so far, the cheapest Model 3 is $44,000. The good news is that the company is making a major push to produce a cheaper Model 3 - though Musk says that the Model 3 was the best-selling premium vehicle in the USA previous year, its starting price of $44,000 is "still too expensive for most people". "We continue to believe Tesla will be able to emerge from the next 12 to 18 months a stronger, profitable more product diversified (geographically and price points) EV company".
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Federal plug-in vehicle tax credits for Tesla buyers have also begin to wind down after Tesla sold its 200,000th auto last July. At the same time, Tesla will look to increase Model 3 production rates to meet its goals for the year ahead.
More than 3,000 people at Tesla will lose their jobs after the electric carmaker said that it would cut its workforce drastically to remain competitive. Shares in Tesla closed down 13 per cent at $302.26.
Mr Musk said 2018 was Tesla's "most successful" yet, in which it delivered nearly as many cars as it had in all the previous years of its existence combined.
Billionaire Elon Musk must be feeling the heat now that General Motors appears on track to surpass Tesla to become the most valuable USA vehicle maker for 2019.
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Even as Tesla struggles to produce a more mainstream vehicle, many industry analysts still see the company as the one to beat, even with the world's biggest automakers now fully engaged in the pursuit of an electric auto.
In essence, Musk is announcing a shift from selling higher-priced cars to selling medium-priced volumes, even though until now one did not seem to exclude the other in Tesla's case.
"Tesla has only been producing cars for about a decade and we're up against massive, entrenched competitors", he said. The analyst said Tesla still leads the electric vehicle industry as it moves the price of its Model 3 auto toward $35,000, while most competitors remain engaged in an "EV negative margin sum game at higher price points".
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The company has already promised that this platform will create a number of models with different types of bodies. On the rendering shows a vehicle with a dynamic silhouette in the spirit XT5 models and futuristic "blind" front.