Tesla has fired hundreds of employees this week including workers at its Fremont, California factory, corporate managers, team leaders and associates after a company-wide annual review as it tries to solve production problems for its recently released Model 3. The electric automaker dismissed an estimated 400 to 700 people this week, San Jose Mercury News first reported on Friday (13 October) – between 1% and 2% of the firm's more than 33,000 employees.

A former employee told Reuters that Tesla fired about 400 employees. Most of those fired were reportedly in sales and administrative roles, rather than manufacturing and engineering.

The dismissals were reportedly performance-related. However, the employee who worked on the assembly line before he was fired this week told Reuters that he had never been given a bad review in the past.

"Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period," a Tesla spokesman said in a statement.

"This includes both constructive feedback and recognition of top performers with additional compensation and equity awards, as well as promotions in many cases. As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures. Tesla is continuing to grow and hire new employees around the world."

News of the dismissals come just one day after Tesla announced a recall affecting 11,000 of its Model X SUVs worldwide due to rear seats that may fail to lock safely in place.

The cuts also come as Tesla struggles to ramp up production for its new Model 3 mass-market sedan. Earlier in October, Tesla reported that it produced 260 Model 3 cars in the third quarter, 220 of which it has delivered.

Musk predicted earlier that the company should be able to achieve productions of about 1,630 Model 3 cars during the quarter, which means he is off by about 84%.

Stamping Model 3 Body Panels (real-time)

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Tesla fired hundreds of employees this week amid struggles to ramp up its Model 3 production REUTERS/Tyrone Siu