In a strategic shift, Tesla has reportedly canceled its plans to produce an affordable electric vehicle, commonly referred to as the “Model 2,” which was anticipated to start at approximately $25,000. This decision comes as the company faces intense competition from Chinese electric vehicle (EV) manufacturers offering models priced as low as $10,000.
Instead of pursuing the low-cost vehicle, Tesla is now focusing on developing self-driving robotaxis based on the same small-vehicle platform. This pivot represents a significant change from CEO Elon Musk’s earlier vision of producing affordable EVs for the mass market. As recently as January, Musk had indicated plans to commence production of the affordable model at Tesla’s Texas factory in the latter half of 2025.
The shift toward robotaxis presents both engineering challenges and regulatory hurdles, potentially extending the timeline for delivery compared to a standard entry-level vehicle. Tesla’s current most affordable model, the Model 3 sedan, retails for about $39,000 in the United States.
This move occurs amid a broader price war in the Chinese automotive industry, initiated in part by Tesla’s own price cuts in late 2022 and early 2023. Chinese EV makers have been aggressively reducing prices to attract customers and increase market share, leading to heightened competition in the global EV market.
Following reports of Tesla’s decision, Elon Musk responded on social media, stating that “Reuters is lying (again),” though he did not specify any particular inaccuracies in the reporting.
Analysts suggest that this strategic pivot could benefit Chinese EV firms by reducing competition in the low-end market segment. However, the success of Tesla’s robotaxi initiative will depend on overcoming significant technological and regulatory challenges in the autonomous driving sector.