'As you know, we are also flattening our management structure to help us communicate better, eliminate bureaucracy and move faster'.
It was not immediately clear if any of the layoffs would affect Tesla's solar panel factory in Buffalo, where the company has been partnering with Panasonic.
Production of the Model 3 stalled in the fall, prompting shareholders to sue the company.
The company will now focus on selling its energy products in its stores and on its website.
Tesla has not made an annual profit in its 15 years of doing business, and it has posted only two quarterly net profits.
Shares of Tesla were up about 3.8% at the time of writing.
Shares in the company rose as much as 7 percent on Tuesday, although they fell back to stand just 3 percent higher on the day after Musk's announcement.
As described previously, we are conducting a comprehensive organizational restructuring across our whole company. The delays and higher costs have put Tesla into unsafe territory where it is rapidly running out of cash and investors have become nervous about lending the company more money.
Tesla will lay off 9 percent of its workforce as it works to reach profitability.
"Given that Tesla has never made an annual profit in the nearly 15 years since we have existed, profit is obviously not what motivates us", Tesla said.
While saying that Tesla is more focused on producing environmentally friendly cars than making money, Musk ask added that "we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable". "That is a valid and fair criticism of Tesla's history to date".
Musk also announced that the company's solar panel unit has made a decision to end its agreement to sell via Home Depot stores so it can focus on sales in Tesla's company stores and online.