Tesla cancels its long-promised inexpensive car

Carmaker will continue developing self-driving robotaxis on the same small-vehicle platform
Tesla cancels its long-promised inexpensive car

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Tesla has cancelled the long-promised inexpensive car that investors have been counting on to drive its growth into a mass-market automaker, according to sources.

The carmaker will continue developing self-driving robotaxis on the same small-vehicle platform, the sources said.

The decision represents an abandonment of a longstanding goal that Tesla chief Elon Musk has often characterised as its primary mission: Affordable electric cars for the masses. His first “master plan” for the company in 2006 called for manufacturing luxury models first, then using the profits to finance a “low cost family car".

Musk has since repeatedly promised such a vehicle to investors and consumers. As recently as January, Musk told investors that Tesla planned to start production of the affordable model at its Texas factory in the second half of 2025.

Tesla’s cheapest current model, the Model 3 sedan, retails for about $39,000 in the United States. The now-defunct entry-level vehicle, sometimes described as the Model 2, was expected to start at about $25,000.

Tesla did not respond to requests for comment. After the story was published, Musk posted on his social media site X that "Reuters is lying (again)." He did not identify any specific inaccuracies.

Tesla shares tumbled more than 6% following the report but recovered some of the loss after Musk's post. The stock was down more than 3% in afternoon trading.

The stark reversal comes as Tesla faces fierce competition globally from Chinese electric-vehicle makers flooding the market with cars priced as low as $10,000. The plan for driverless robotaxis, which could take longer to deliver, presents a stiffer engineering challenge and more regulatory risk.

Two sources said they learned of Tesla's decision to scrap the Model 2 in a meeting attended by scores of employees, with one of them saying the gathering happened in late February.

“Elon’s directive is to go all in on robotaxi,” that person said.

The third source confirmed the cancellation and said new plans call for robotaxis to be produced, but in much lower volumes than had been projected for the Model 2.

Squeezing profits from entry-level vehicles is a challenge for any carmaker. But Tesla’s delay in pursuing the car Musk once called his dream made it much tougher because it now faces far more competition in that price range.

  • Reuters

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