Tesla reportedly abandons plans to make a less expensive $25,000 electric vehicle

The Tesla Model 2 may be no more.

According to Reuters, Elon Musk has canceled the company’s plans to build a low-cost electric vehicle in favor of going all in on a robotaxi. The news outlet, citing three sources in the know, said the decision was communicated to employees during an all-hands meeting in late February.

For years, Musk has been promising an affordable electric vehicle, likely priced at $25,000, as a way to broaden the appeal of plug-in vehicles. He first mentioned it in a 2018 interview with YouTuber Marques Brownlee, saying, “A $25,000 car, that’s something we can do.” Then, in 2020, at the company’s first Battery Day event, he speculated that Tesla could eventually produce upward of 20 million of these vehicles in a year — or roughly twice the current production of Toyota, GM, or Volkswagen.

Musk has said the more affordable EV would be built on the company’s next-generation vehicle platform, which is still under development. During an earnings call earlier this year, Musk said the company is targeting production “towards the end of 2025” but warned of delays due to the complexities of the manufacturing process.

“We are focused on bringing the next generation platform to market as quickly as we can, with the plan to start production at Gigafactory Texas,” Tesla said in a note to shareholders. “This platform will revolutionize how vehicles are manufactured.”

The shift in strategy comes as Tesla faces increasing pressure from Chinese automakers, which have been producing more affordable EVs for years. Musk has said that allowing Chinese companies to sell cheap EVs in the United States would be a death sentence for domestic automakers like his own. There are not any Chinese cars currently available for sale in the US due to high tariffs.

“Frankly, if there are not trade barriers established, they will pretty much demolish most other car companies in the world,” Musk said. “They are extremely good.”

While Tesla spent years developing the expensive, polarizing Cybertruck, the company lost its place as the world’s top producer of electrified vehicles to China’s BYD. The company said it produced 3.02 million EVs in 2023, compared to Tesla’s 1.81 million cars.

Earlier this year, Reuters reported that Tesla was planning to start production on an all-new electric crossover vehicle in mid-2025. The company invited suppliers to bid to work on the car and forecasted producing 10,000 vehicles weekly. Speculation was that this could be Tesla’s long-promised $25,000 vehicle for mass-market consumers and that it could borrow some design elements from the recently released Cybertruck.

In addition to a more affordable EV, Musk has also been promising a Tesla robotaxi that would revolutionize car ownership. “By the middle of next year, we’ll have over a million Tesla cars on the road with Full Self-Driving hardware,” Musk said in 2019. Tesla’s Full Self-Driving (FSD) feature would be so reliable the driver could “go to sleep,” he added. (Teslas with the company’s FSD software are not autonomous, and drivers would be well advised to not sleep in their cars.)

Last year, Musk biographer Walter Isaacson told Axios that the car would have a futuristic Cybertruck-style design and be developed alongside an autonomous robotaxi. The company teased a pair of new vehicles at an investor event in March, with one appearing to be a smaller car and the other, a small commercial truck. 

In Isaacson’s book, Musk speculated that he could put the affordable EV on hold in favor of the robotaxi, arguing that a fully autonomous vehicle would make the cheap EV irrelevant.