This news was qualified in a statement made by Musk, who clarified that the cuts would be targeting salaried employees, and not factory jobs, ensuring that the company's production of the Model 3 would go unaffected.
"Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplications of roles and some job functions".
Tesla will notify the affected workers this week and and although an exact number of job losses has not yet been confirmed a spokesman said it would reduce overall employment back to around 37,000 - roughly in line with numbers at the end of previous year.
Musk also said that Tesla had decided not to renew a residential sales agreement with Home Depot, and would focus instead on selling its solar products through its own stores and website.
It could be a signal to employees and Wall Street that he's still optimistic about the future of Tesla.
Musk conceded that Tesla has not made an annual profit in 15 years. "Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are hard to justify today", the email reads.
It's not the first time Tesla has laid off workers. "We will never achieve [our] mission unless we eventually demonstrate that we can be sustainably profitable", he wrote in the letter.
Consumer Edge Research Analyst James Albertine wrote in a note to investors that he views the moves "as a positive in helping Tesla track toward profitability later this year".
Tesla has been trying to hit a 5000 per week production target for its Model 3 sedan after facing initial production hiccups. "The layoffs may help them to achieve profitability in the near-term but not sustain it".