Tesla has reportedly scrapped its long-awaited affordable car, a vehicle investors had anticipated to propel its expansion into the mass-market automotive sector, as per information from three insiders and communications from the company reviewed by Reuters.
According to three sources familiar with the matter and company messages seen by Reuters, Tesla has decided to cancel its long-awaited affordable car, a move investors had been banking on to drive its expansion into the mass-market automotive sector.
The decision to scrap plans for the entry-level Tesla vehicle, dubbed the Model 2, was reportedly communicated during a meeting attended by numerous employees in late February. Instead, Tesla will shift its focus towards developing self-driving taxis, as indicated by sources.
The strategic pivot comes amidst intensified competition for Tesla from Chinese electric vehicle manufacturers like BYD, who have flooded the market with affordable cars priced as low as $10,000.
The cancellation of the Model 2 marks a significant reversal for Tesla, especially as it faces increasing competition globally. While Tesla has been concentrating on projects like the experimental Cybertruck, Chinese automakers have surged ahead in producing affordable EVs, gaining market share and offering competitive prices.
The decision to abandon plans for the affordable Tesla vehicle has raised questions about Elon Musk’s ambitious sales targets. Musk previously aimed for Tesla to sell 20 million vehicles by 2030, but with the demise of the Model 2, achieving this goal appears uncertain.
Wall Street analysts had pinned their expectations for Tesla’s sales growth on the success of the $25,000 vehicle, with forecasts projecting a rise in vehicle sales to 4.2 million by 2028. However, with the cancellation of the Model 2, these forecasts now face uncertainty.
Elon Musk has previously wavered on the project, reportedly putting it on hold in 2022 in favor of pursuing Tesla’s robotaxi initiative. However, Musk’s advisors encouraged him to pursue the entry-level EV plans.
The decision to discontinue the affordable car represents a departure from Tesla’s longstanding goal of making electric cars accessible to the masses, a mission that Musk has often emphasized since Tesla’s inception.
Following the Reuters report on Tesla’s decision, the company’s shares fell by nearly 5%, indicating investor concern over the strategic shift.
Despite the cancellation of the Model 2, Elon Musk had previously assured investors of Tesla’s commitment to producing affordable electric vehicles, with plans to begin production at its Texas factory in the second half of 2025, as reported exclusively by Reuters.
Elon Musk just said “Reuters is lying (again)”
Elon Musk has refuted Reuters’ claim that Tesla, $TSLA, has abandoned its plans for an ultra low-cost vehicle and instead will concentrate on creating a self-driving robotaxi using the same small-vehicle platform.
Tesla’s website now notifies prospective Cybertruck purchasers that new orders will be fulfilled in 2025, a shift from the previously mentioned 2024 timeline. To initiate the ordering process, a refundable deposit of $250 is required, with configuration invitations scheduled upon truck readiness. Although Tesla has not revealed Cybertruck-specific delivery numbers, the company’s first-quarter production reached 20,995 units, with 17,027 units successfully delivered. Despite existing production hurdles and over one million pre-orders, Tesla aims to manufacture 250,000 Cybertrucks annually by 2025.
Update
Tesla, $TSLA, aims to counter cheaper competition from China by introducing a $25,000 electric car, as reported by Bloomberg. However, this endeavor requires revamping the production line established by Henry Ford. The company is transitioning to what it terms an “unboxed” methodology, resembling the construction of Lego pieces.
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