Texas: Three people with knowledge of the situation and corporate communications obtained by Reuters claim that Tesla has canceled the long-promised low-cost vehicle that investors had been hoping would propel the firm’s expansion into a mass-market automaker.
According to the insiders, the manufacturer will keep working on self-driving robotaxis using the same small-vehicle platform. Affordable electric cars for the general public, which Tesla CEO Elon Musk has frequently described as the company’s primary aim, has now abandoned as a result of this move. In 2006, he devised his initial master plan for the company, which involved producing premium models first and then financing a low-cost family car with the proceeds.
Following the Reuters article, Tesla shares fell almost 3% in early afternoon trading.
Since then, Musk has made numerous promises to investors and customers about the creation of this car. Following an exclusive Reuters article outlining such intentions, Musk informed investors as late as January that Tesla intended to begin production of the entry-level model at its Texas factory in the second half of 2025.
The Model 3 sedan, which is currently Tesla’s least expensive model, costs roughly $39,000 at retail in the US. The now-defunct entry-level car, commonly referred to as the Model 2, was anticipated to have a starting price of approximately $25,000.
Requests for comments from Tesla were not answered.
Musk declared that “Reuters is lying (again)” on his social media platform X upon the story’s publication. He did not point out any particular errors.
The dramatic turnabout occurs as Chinese electric vehicle manufacturers, who are flooding the market with vehicles as cheap as $10,000, are posing a serious threat to Tesla’s market share globally. The concept of driverless robotaxis has a greater engineering difficulty and regulatory risk, and it may take longer to implement.
Two people, one of whom said the meeting took place in late February, said they were informed of Tesla’s plan to abandon the Model 2 at a meeting that was attended by numerous employees.
That source stated that Elon’s directive is to fully commit to Robotaxi.
The third source confirmed the cancellation and stated that robotaxis will now be created, albeit in considerably less quantities than initially anticipated for the Model 2.
A March 1 communication from an anonymous program manager for the inexpensive car discussed the project’s fate with engineering personnel and advised them to postpone informing suppliers about the program cancelation, according to several business mails that Reuters analyzed regarding the decision.
A fourth source familiar with Tesla’s intentions voiced optimism regarding the company’s choice to shift its focus from the low-cost automobile approach to robotaxis, which Musk has envisioned as the mobility of the future. The insider warned that depending on the state of the economy, Tesla’s product plans might alter once more.
For any carmaker, extracting revenues from entry-level automobiles is a difficult task. However, it is now much harder due of Tesla’s tardiness in pursuing the vehicle Musk originally referred to as his goal, as it now confronts much more competition in that price range.
Chinese manufacturers have pushed ahead with cost-effective electric vehicles (EVs), capturing market share, obtaining economies of scale, and providing consumers with deals that Western automakers are finding difficult to match. Meanwhile, Tesla has been working for years on creating its highly experimental Cybertruck, an expensive electric pickup.
Musk was tending to his vast empire, which included the social media behemoth X that he acquired in 2022, the rocket manufacturer SpaceX, and the brain-chip developer Neuralink, as Chinese EVs soared to challenge Tesla’s dominance. The website, which was formerly known as Twitter, has collapsed under Musk’s capricious leadership, losing the majority of its value as the business has lost customers and sponsors.
