Tesla says it will cut thousands of jobs to rein in costs as it plans to increase production of lower-priced versions of its crucial Model 3 sedan.

The announcement sent the car makers shares down as much as 10 per cent.

The company, which has struggled to achieve long-term profitability and keep a tight lid on expenses, also says it expects fourth-quarter profit to be lower than the preceding quarter.

Chief executive Elon Musk said the need for lower-priced versions of the Model 3 will become even greater from July.

Thatís when the US tax credit drops in half, adding $US1875 ($A2605) to the carís price tag, and again at the end of the year when it goes away entirely.

Musk said on Friday the company would need to deliver at least the mid-range Model 3 version in all markets starting around May, as it needs to reach more customers who can afford the vehicles.

The electric car maker said on Friday it would reduce full-time employee headcount by about 7 per cent and retain only the most critical temps and contractors.

In June, Tesla said it was cutting 9 per cent of its workforce.

Musk tweeted in October that the company employed 45,000 people.