Tesla Model 2 abandoned? Multiple sources say $25,000 electric car dead, Elon says it’s all lies
Media reporting says Tesla has given up its plans of launching its entry-level Tesla Model 2 because of increased competition and the price war it is waging in China.
According to Reuters multiple sources behind the scenes have confirmed the affordable EV is no longer happening with resources switched to developing self-driving robotaxis.
Tesla had planned to launch a low-cost entry EV rumoured to be dubbed the Tesla Model 2 as soon as the second half of 2025, with production already assigned to the car-maker’s plant in Texas.
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Set to have been on sale in all global markets before the end of 2025, the Tesla Model 2 was designed to be priced below US$25,000 ($38,000) before being axed at short notice.
Reuters says the affordable EV was canned in late February when the engineering team contacted suppliers involved in the Model 2’s development and told them to hold off on any further investments.
The Tesla employees told third-parties the decision was based on economic conditions.
It’s thought the increase in the number of affordable EVs, mostly from Chinese car-makers, plus the ongoing price war Tesla is waging in China meant senior execs were no longer comfortable producing a vehicle with a small profit margin.
There were fears the Model 2 could become unsustainable soon after launch.
Also applying pressure are the influx of rivals from Europe with car-makers like Renault and the Volkswagen Group announcing their own affordable EV priced at around $30,000.
The cancellation of the Model 2 leaves Tesla’s grand expansion plans in disarray. It wanted to become the world’s largest car-maker by delivering 20 million vehicles a year by 2030 – twice the volume Toyota currently shifts annually.
Following the news the Tesla Model 2 is dead the car-maker’s stock price slumped by as much as six per cent late last week.
Posting on his X (formerly Twitter) Tesla’s Elon Musk said: “Reuters is lying (again)” but the outspoken CEO did not identify any inaccuracies in the story.
Instead, Musk went on to say “Tesla Robotaxi unveil on 8/8”, which saw the car-maker’s share price back up in after-hours trading.
Industry analysts have been mixed in their response to Tesla abandoning its affordable EV, with the critics theorising robotaxis could also be a mistake as they’re costly to develop, take longer to deliver, present huge technical difficulties and, currently, are illegal to sell in most markets because of regulatory hurdles.
Set to be priced far higher than even the current Model 3 sedan, the new robotaxi will be built on the same platform that was originally destined for the Model 2 to save costs.
No timeline has been given for when Tesla plans to introduce its robotaxi but more will be revealed following the unveil of the concept in August.
Tesla has admitted it is struggling at the moment with overall sales down eight per cent year-on-year while Chinese rivals like BYD are reporting record sales.
