Low-Cost Tesla Plans Scrapped Amid Fierce Chinese Competition

(CTN News) – Investors counted on Tesla’s inexpensive car to drive its growth into a mass-market automaker, but it’s been canceled, according to three sources familiar with the matter.

According to sources, the automaker will keep developing self-driving robotaxis.

This decision abandons Tesla’s primary goal: affordable electric cars for everyone. A luxury car would be the first product, then a low cost family car would be financed by the profits.

Investors and consumers have repeatedly asked him for such a vehicle. Reuters reported in January that Tesla plans to start producing the affordable model in 2025.

Tesla’s cheapest sedan, the Model 3, costs about $39,000 in the US. Some referred to the Model 2 as the entry-level vehicle.

The reversal comes as Chinese electric-vehicle makers flood the market with cars starting at $10,000. There’s a higher engineering challenge and more regulatory risk with driverless robotaxis.

Tesla scrapped the Model 2 in a meeting attended by scores of employees, according to two sources.

“Elon wants to go all in on robotaxi,” that person said.

According to a third source, robotaxis will still be made, but in lower volumes than had been projected for Model 2.

On March 1, an unnamed program manager for the affordable car talked to engineers about the project’s demise and advised them not to tell suppliers “about the cancellation of the program.”

Four people with knowledge of  plans expressed optimism about the decision to pivot from cheap cars to robotaxis, which Musk sees as the future. Based on economic conditions, Tesla’s product plans could change again.

The entry-level market is tough for automakers. Musk’s delay in pursuing his dream car now makes it much harder for Tesla to succeed.

China’s automakers are leading the way with affordable electric cars, grabbing market share, gaining economies of scale, and providing bargains Western automakers can’t match.

While Chinese EVs surged to challenge, Musk was juggling his sprawling empire, which includes SpaceX, Neuralink, and X, which he acquired in 2022. It’s lost most of its value under Musk’s volatile management, as it’s lost revenue and advertisers.

Affordability is key to Musk’s ambitious sales plans. As much as twice the number of Toyota cars will Tesla sell by 2030. Model 2 died, so he’s not sure how to get there.

The expectation of a $25,000 Tesla has driven Wall Street analysts’ more modest, but still ambitious, sales forecasts. A Tesla investor-relations document says sales will rise from 1.8 million last year to 4.2 million by 2028.

It’s not the first time Musk has wavered. Issacson reported last year that Musk “paused” the entry-level EV plans in 2022 because a Tesla robotaxi would make the car irrelevant. The book says Musk’s advisors told him to keep going.

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