Musk's memo, which was sent to all employees, also announced that the company was cutting 9% of its total workforce as part of a reorganization created to reduce costs and help the electric automaker become profitable.
The terminated jobs will be confined to salaried positions and not include any production workers, meaning the company's Model 3 productions targets will apparently go unaffected.
The move will not affect factory workers as Tesla continues to ramp up production of its lower-priced Model 3 compact auto.
Tesla shares pared an earlier gain of as much as 6.9 per cent and were up 3.2 per cent to US$342.81 as of 2:21 p.m.in NY trading.
"Our checks with sales centers indicate Model 3 deliveries are tracking [about] 50% higher than our prior estimates for the quarter, prompting us to raise our estimates", Erikson said in a note, according to CNBC.
"9 percent job cut is a good number and I don't think there will be more job cuts in the near term", Efraim Levy, analyst at CFRA Research said.
He noted that Tesla has never made an annual profit - a point that's often made by critics. Year-to-date, Tesla's headcount is up roughly 15%. "What drives us is our mission to accelerate the world's transition to clean, sustainable energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable".
Tesla started selling solar panels and home battery packs at Home Depot earlier this year.
To be clear, Tesla will still continue to hire outstanding talent in critical roles as we move forward and there is still a significant need for additional production personnel. He thanked departing employees for their hard work and said Tesla is providing "significant salary and stock vesting" to those being let go, based on their length of service.