The US car manufacturer Tesla According to insiders, has buried its plan to build a low-cost electric car for the mass market. Two people familiar with the plans told Reuters they learned of the decision in a meeting with employees. One of the insiders said the meeting took place at the end of February.
Tesla boss’s instructions Elon Musk (52) is now to rely entirely on robotaxis. The insiders said they did not know all the reasons for the cancellation decision. However, the about-face comes at a time when Tesla is facing fierce competition from rivals around the world China some of which flood the market with cars for just $10,000.
Tesla did not initially respond to a request for comment. After the publication of the Reuters report, CEO Musk wrote on his short message platform X “Reuters is lying (again)” without elaborating further. The group’s shares fell by up to six percent on Friday after the Reuters report.
“Cheap cars” have been an issue since 2006
Musk has repeatedly stated for years that Tesla wants to build affordable electric cars for the masses. His first “master plan” from 2006 called for first producing luxury models and then using the profits to finance an “inexpensive family car”. The currently cheapest Tesla model, the Model 3 sedan, costs in the USA about $39,000. The “cheap” model, sometimes called “Model 2″, should start at around $25,000. Musk only said in January that Tesla wanted to start production of this model in Texas in the second half of 2025.
According to experts, relying on robotaxis is risky. The implementation of the driverless robot project could take longer, mean a greater technical challenge and a greater risk in terms of official approval. An insider said the new robotaxi plans would involve building them in significantly smaller numbers than the initially planned Model 2.
Tesla had recently worked for years on the development of its Cybertruck, an expensive electric pickup. During this time, manufacturers from China have moved forward with affordable electric cars, captured market shares and achieved economies of scale. They now offer prices that Western car manufacturers find difficult to compete with.
The plans for the affordable Tesla were seen as key to realizing Musk’s sales growth ambitions. In 2020, he said that Tesla wanted to sell 20 million vehicles per year by 2030 – twice as many as the world’s largest car manufacturer currently sells Toyota. If the Model 2 is not built, it would be more open than ever how Musk wants to achieve his goal.
Tesla shares: price slide
According to a March 1 Tesla email seen by Reuters, a manager thanked the project’s technical staff for their efforts and asked them to document their findings.
With Friday’s price slide, Tesla shares have fallen by more than 40 percent since July 2023, which corresponds to a loss in market value of around $400 billion. Nevertheless, the market capitalization of around $545 billion is still far higher than the combined value of the next three most valuable manufacturers: Toyota, Porsche and Mercedes. However, the expectation of success in the mass market and in driverless cars is also priced into Tesla’s price.