Tesla has reportedly scrapped its plans to produce an affordable car, a move that investors had anticipated to fuel the company’s expansion into a mass-market automaker. According to three sources familiar with the matter and company communications seen by Reuters, Tesla will instead focus on developing self-driving robotaxis using the same small-vehicle platform.
This decision marks a departure from Tesla CEO Elon Musk’s longstanding goal of making electric cars accessible to the masses. Musk’s initial vision for Tesla in 2006 prioritized manufacturing luxury models first to fund the production of affordable family cars.
Tesla’s stock fell around three percent following the Reuters report. Musk had previously assured investors and consumers of an affordable vehicle, with plans as recent as January to begin production at Tesla’s Texas factory in the latter half of 2025.
The canceled entry-level vehicle, often referred to as the Model 2, was expected to be priced around $25,000, contrasting with Tesla’s current cheapest model, the $39,000 Model 3 sedan.
Tesla has not commented on the decision, though Musk responded on his social media platform, X, accusing Reuters of inaccuracies without specifying details.
This change in strategy comes as Tesla faces fierce competition from Chinese electric vehicle manufacturers offering cars priced as low as $10,000. Prioritizing the development of self-driving robotaxis presents its own challenges, including engineering complexities and regulatory hurdles.
Sources revealed that Tesla employees learned of the decision to scrap the Model 2 in a meeting held in late February. Elon Musk has reportedly directed the company to focus on robotaxis, albeit at lower production volumes than initially planned for the Model 2.
While some expressed optimism about Tesla’s pivot towards robotaxis, others cautioned that the company’s product plans could evolve based on economic factors.
Tesla’s delay in pursuing an affordable car has posed challenges, as Chinese automakers have surged ahead in the market for affordable electric vehicles, offering competitive prices and gaining market share.
Amidst these developments, Musk’s attention has been divided among Tesla, SpaceX, Neuralink, and X, the social media platform he acquired in 2022. Under Musk’s leadership, X has struggled, experiencing significant declines in revenue and advertiser support.
