Tesla has made a significant shift in its strategy, announcing the cancellation of its long-awaited affordable electric car, a move that has left investors and consumers stunned.
The decision, revealed by three reliable sources familiar with the matter and corroborated by company messages obtained by Reuters, marks a departure from Tesla’s earlier mission of bringing affordable electric vehicles to the masses.
The automaker, instead, will pivot its resources towards the development of self-driving robotaxis, utilizing the same small-vehicle platform, according to insiders. This strategic redirection signifies a significant deviation from Tesla CEO Elon Musk’s previous commitments and vision outlined in the company’s initial “master plan” in 2006.
Musk, who has often emphasized the goal of making electric cars accessible to a broader audience, had initially promised investors and consumers an affordable vehicle following the success of luxury models. However, despite repeated assurances from Musk, including as recent as January, wherein he outlined plans for production at Tesla’s Texas factory by the second half of 2025, those aspirations have been dashed.
Tesla’s cheapest model currently available, the Model 3 sedan, comes with a price tag of approximately $39,000 in the United States. The now-scrapped entry-level vehicle, often referred to as the Model 2, was anticipated to be priced around $25,000.
In response to inquiries, Tesla remained silent, offering no official comment on the matter. However, Musk took to social media platform X to dispute the Reuters report, without specifying any inaccuracies, leading to a momentary fluctuation in Tesla’s stock prices.
Following Musk’s online intervention, where he hinted at an upcoming Tesla Robotaxi unveiling, the company’s shares experienced a rebound in after-hours trading. This abrupt change in direction comes amidst mounting competition in the global electric vehicle market, particularly from Chinese manufacturers offering vehicles at significantly lower price points.
The decision to prioritize the development of self-driving robotaxis, though potentially lucrative, poses considerable engineering challenges and regulatory hurdles, as highlighted by industry experts.
Leaks reveal that the decision to scrap the Model 2 was communicated to employees in a meeting held in late February, further underscoring Tesla’s strategic pivot in the face of evolving market dynamics.
