Tesla’s highly anticipated affordable car, long-awaited by investors and consumers alike, has been canceled. Sources familiar with the matter and internal company messages revealed. The decision marks a significant departure from Tesla’s initial vision of becoming a mass-market automaker and instead pivots towards the development of self-driving robotaxis, sources disclosed.
Elon Musk, Tesla’s chief, had previously championed the goal of providing affordable electric cars for the masses, outlining plans in the company’s early days to produce a “low cost family car” following the success of luxury models. Despite repeated promises to investors and consumers, the cancellation of the entry-level vehicle, often referred to as the Model 2, represents a substantial shift in Tesla’s strategic direction.
Tesla’s cheapest current model, the Model 3 sedan, is priced around $39,000 in the United States, whereas the now-scrapped Model 2 was expected to start at approximately $25,000. Following the Reuters report, Tesla’s shares plummeted over 6%, although they partially recovered after Musk’s denial on social media platform X.
Musk’s recent social media posts hint at a future unveiling of Tesla’s robotaxi, suggesting a redirection of focus towards autonomous vehicles. According to sources, Tesla’s plans now involve producing robotaxis in lower volumes compared to the previously projected Model 2.
Despite initial disappointment among investors, some industry insiders express optimism regarding Tesla’s shift towards robotaxis, which Musk views as the future of mobility. However, uncertainties persist regarding Tesla’s timeline and business model for implementing robotaxi technology.
The cancellation of the affordable-car project signals Tesla’s challenges in navigating the competitive market of electric vehicles, particularly amidst the rapid growth of Chinese automakers in the affordable EV segment. Tesla’s delayed pursuit of an affordable car has intensified competition and heightened the difficulty of achieving profitability in this price range.
Moreover, Tesla’s focus on innovative projects beyond automotive, including SpaceX, Neuralink, and X, has contributed to its evolving priorities and strategic decisions. Musk’s expansive vision for Tesla’s future sales growth faces renewed scrutiny in light of the Model 2’s demise.
The cancellation of the affordable-car project comes at a time when Tesla faces mounting challenges, including regulatory scrutiny, manufacturing issues, and slowing demand growth. Tesla’s market dominance and valuation have long been tied to expectations for mass-market sales and advancements in autonomous driving technology.
Tesla’s strategic realignment raises questions about its ability to maintain competitiveness in the rapidly evolving EV market, particularly against established and emerging players in China.