Tesla has canceled 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 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.” Tesla shares fell 4% after the Reuters report. He has since repeatedly promised such a vehicle to investors and consumers.
Tesla did not respond to requests for comment. 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.
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 program 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 favor of robotaxis, a segment Musk has envisioned as the future of mobility.
Plans for the affordable Tesla have been seen as key to delivering on Musk’s stratospheric ambitions for sales growth. Musk said in 2020 that Tesla aspired by 2030 to sell 20 million vehicles – twice as many as the world’s largest automaker, Toyota, sells today. With the death of the Model 2, it’s unclear how he’ll get there. Expectations for a $25,000 vehicle have underpinned Wall Street analysts’ more modest, but still ambitious, forecasts for Tesla sales. Those forecasts, according to a Tesla investor-relations document, call for vehicle sales rising to 4.2 million by 2028 from 1.8 million last year.
The affordable-car project’s cancellation comes as Tesla and other established automakers have been rocked by slowing EV demand growth in the United States and Europe, and cut-throat competition in China. If Tesla had moved forward with the low-cost car, it wouldn’t have arrived on the market until the latter half of 2025, by the company’s estimate. But the entry-level EV segment is already crowded with compelling models from BYD and many other Chinese brands. Tesla is late to the segment in part because of a pivotal decision by Musk.
Musk unveiled a prototype of the angular, stainless steel-clad truck in 2019 and predicted a starting price of about $40,000. The vehicle finally arrived last year as a 2024 model. The two versions available now start at about $80,000 and $100,000. Tesla says a lower-end Cybertruck costing about $61,000 won’t be ready for delivery until 2025. The company has also struggled to work through manufacturing problems, particularly with the truck’s pioneering battery technology.
