Tesla Chief Executive Elon Musk quickly denied a report claiming that the American electric vehicle giant is ditching its plans to develop and launch a $25,000 electric car, widely referred to as the “Tesla Model 2.”
Tesla reportedly scrapped mass-market EV plans
Tesla allegedly decided to cancel the development of its long-promised $25,000 electric car, which its investors had been expecting to propel its growth amid the growing preference for low-cost models over luxury ones, Reuters reports, citing three sources familiar with the matter and company messages.
According to the sources, Tesla still aims to build its self-driving robotaxis on the same small-vehicle platform planned for the Model 2.
“Elon’s directive is to go all in on robotaxi.”
One of the sources said
The report drove down Tesla shares more than 6%. However, it only recovered some of the loss after CEO Elon Musk denied the claims. Tesla stock dropped 3.6% at Friday’s market close.
Thereafter, the Tesla boss further stimulated interest by announcing the Robotaxi’s imminent debut. In effect, Tesla shares surged in after-hours trading.
Tesla CEO refutes Model 2 development cancellation
Tesla CEO Elon Musk immediately denied the report that the company no longer plans to roll out its long-promised $25,000 electric car as it seeks to become a mass-market automaker as well.
For context, the Musk-led company has been working on its next-gen platform to support its planned mass-market smaller model (Tesla Model 2) and self-driving EV (Robotaxi). In contrast to Reuters’ report, it turns out that Tesla does not plan to cancel the Tesla Model 2 in favor of the Robotaxi.
Interestingly, CEO Musk did reply to a TSLA investor’s X post, seemingly in agreement, that the company might focus on the Robotaxi first before the $25,000 car.
“…Maybe Elon and the team have been so impressed with how good FSD 12 has performed and were maybe thinking they should be shifting even more resources to the Robotaxi/FSD effort.
This doesn’t mean the $25k car is canceled. Again, they share the same platform.”
TSLA investor Sawyer Merritt
$25k Tesla car history
Tesla’s plans to offer a smaller and cheaper electric car model are crucial to its strategy to compete with Chinese brands’ low-cost offerings, especially those from BYD.
Ditching the $25,000 Tesla Model 2 could potentially alter investors’ perception of the automaker’s growth trajectory, considering that most customers now prefer cheaper EVs.
Notably, the Tesla boss has long lauded the significance of having a low-cost compact crossover. He even said it would kick off production at Giga Texas toward the end of 2025, with debut plans toward the end of this year. However, CEO Musk hedged this projected schedule, urging investors to take his optimism “with a grain of salt.”
It is worth noting that Tesla and CEO Musk recently focused significantly on developing autonomous technology. After officially launching the FSD 12, the CEO ordered installing the system on every new vehicle it produces. Moreover, Tesla also launched a 1-month free FSD trial to enable more people to try the technology.
