Elon Musk restructures Tesla to iron out Model 3 production issues

Elon Musk, the founder of the Tesla, warned of a shake-up during California-based Tesla's earnings call a fortnight ago. Photo / AP

Tesla is undergoing a major restructuring as the company battles to sort out its organisational problems and bottlenecks that are holding up production of its latest electric car, putting its financial targets in jeopardy.

Elon Musk, the founder of the company, warned of a shake-up during California-based Tesla's earnings call a fortnight ago.

In a memo seen by The Daily Telegraph, Tesla chief executive Musk told staff that "to ensure Tesla is well prepared for the future, we have been undertaking a thorough reorganisation of our company".

"As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission."

No details were given of where activities were being cut at the business but Musk emphasised that the company was continuing to hire staff.

"To be clear, we will continue to hire rapidly in critical hourly and salaried positions to support the Model 3 production ramp and future product development," he said.

Tesla has repeatedly missed production targets for its Model 3 electric car – a lower-priced vehicle intended to make electric motoring go mainstream.

The company has been targeting building 5,000 Model 3s a week, but has yet to hit this rate. At the Tesla's last earnings report, Musk said the figure should be reached in about two months, with the company having "largely overcome" the production bottleneck which had caused delays to its ramp-up.

Problems with the production line dealing with the cars' battery modules had been one of the biggest issues.

Tesla was also trying to automate as much of the work as possible, which contributed to delays.

In a tweet on Sunday, Musk described as "fair criticism" a report that Tesla was making the same mistakes that General Motors made in the Eighties when it spent billions on a largely unsuccessful attempt to automate car manufacturing.

The billionaire entrepreneur added in the tweet that Tesla had a "hackathon going on right now to fix the two worst robot production chokepoints", and that the effort "looks promising".