SAN FRANSISCO--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 three sources familiar with the matter and company messages seen by Reuters.
The automaker 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 characterized 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, following an exclusive Reuters report detailing those plans. 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 Reuters' report but recovered some of the loss after Musk's post. The stock was down 3.6% at Friday's market close. Shortly afterward, Musk posted on X: "Tesla Robotaxi unveil on 8/8," sending shares back up in after-hours 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. Several company messages reviewed by Reuters about the decision included one on March 1 from an unnamed programme manager for the affordable car discussing the project’s demise with engineering staff and advising them to hold off on telling suppliers “about program cancellation.” A fourth person with knowledge of Tesla’s plans expressed optimism about the decision to pivot away from the cheap-car strategy in favour of robotaxis, a segment Musk has envisioned as the future of mobility. The source cautioned that Tesla’s product plans could change again based on economic conditions.
