In a recent turn of events, Tesla CEO Elon Musk has vehemently denied reports published by Reuters claiming that the electric car company has abandoned its plans to develop new low-cost models. According to Reuters, three unnamed officials “familiar with the matter” and alleged company messages revealed that Tesla had scrapped its goal of bringing an entry-level vehicle, known as the Tesla Model 2, to the market. This line of vehicles was expected to have a starting price of $25,000, significantly lower than Tesla’s current cheapest offering, the Model 3 sedan, which sells for around $39,000.
Reuters reported that Tesla had decided to focus on developing self-driving robotaxis instead, with one of their sources stating, “Elon’s directive is to go all in on robotaxi.” The alleged decision to abandon the low-cost electric vehicle line was discussed during a company meeting in late February and subsequently shared through messages within the company in March. Internal references to the Model 2 project included NV91 and H422.
Tesla’s response to Reuters’ reporting was swift and resolute, with Musk taking to his X social media platform to state, “Reuters is lying.” Although he did not provide any further elaboration, he later posted, “Reuters is dying,” on the same platform. Musk’s response left many wondering about Tesla’s future plans and whether the Model 2 and “robotaxi” projects would be based on the same platform. Musk responded to a post speculating about this possibility with an eyeballs emoji but did not provide additional information.
As news of the alleged Model 2 cancellation spread, Tesla’s stock prices dipped. However, they partially recovered after Musk’s denial of Reuters’ report. This comes in the same week that Tesla reported a decline in deliveries for the first quarter of the year, citing factory shutdowns due to shipping disruptions and an arson attack at the Tesla Gigafactory in Berlin as contributing factors.
While Tesla faces its own challenges, competition in the electric vehicle market is also growing. U.S. EV makers are becoming increasingly concerned about the rise of Chinese entries into the market. Carlos Tavares, CEO of Stellantis N.V., a Chrysler subsidiary, expressed worries about the potential entry of low-cost Chinese EVs and the phasing out of internal combustion engine vehicles, stating that it poses an “existential problem” for automakers without competitively priced EV options. Even Musk himself has acknowledged the competitiveness of Chinese car companies, stating that they are the most competitive in the world and have the potential to demolish other car companies globally if there are no trade barriers in place.
Chinese automaker BYD is already making waves in the market with its electric vehicle, the Seagull, which is priced at around $11,000. In contrast to Tesla’s decline in deliveries, BYD reported a 13 percent increase in EV sales for the first quarter of 2024 compared to last year.
As Tesla continues to navigate challenges and speculation surrounding its future plans, it remains to be seen how the company will respond to these reports and if they will indeed focus solely on developing self-driving robotaxis or revive their plans for a low-cost electric vehicle. In a rapidly evolving electric vehicle market, competition from both established automakers and new entrants, particularly from China, poses significant challenges for Tesla and other U.S. automakers. The coming months will undoubtedly shed more light on the direction Tesla chooses to take and how it will fare in this increasingly competitive landscape.
