Reuters cited “three sources familiar with the matter” as saying the company was abandoning plans to produce the low-cost EV and was instead pivoting to manufacturing self-driving robotaxis.
The furious billionaire took to his X social media platform to refute the report.
“Reuters is lying (again),” he wrote, but did not cite anything that was inaccurate.
Hours later, Musk posted another tweet that said the Robotaxi will be unveiled on Aug. 8.
A Reuters spokesperson told The Post, “We stand by our reporting.”
The decision represents an abandonment of a longstanding goal that Tesla chief Elon Musk has often characterized as its primary mission.REUTERS
Tesla stock plunged by as much as 6.2% after the initial report before finishing down 3.6% following’s Musk denial.
The stock has plunged 33% this year — dropping Musk from his perch as the world’s richest person and into the third spot on the Bloomberg’s Billionaires Index.
In January, Musk told investors that Tesla planned to start production of an affordable EV model — dubbed the “Model 2” and reportedly priced at $25,000 — at its Austin, Texas, gigafactory in the second half of 2025.
Tesla called the affordable-car project NV91 internally and H422 externally when discussing it with suppliers, according to two of the sources and company messages reviewed by Reuters.
Messages from the unnamed Tesla program manager to staffers referenced those code names in discussing the project’s termination. One of those messages sent March 1 said that “suppliers should halt all further activities related to H422/NV91.”
In another March 1 message, the manager thanked engineering staffers for their efforts and urged them to document what they had learned.
Tesla’s cheapest current model, the Model 3 sedan, above, retails for about $39,000.REUTERS
“I’d like to thank everyone for all your hard work and dedication to pushing boundaries and executing the best design possible given the aggressive constraints we had to work within,” the message said.
“We would not want all our hard work to go to waste, so it’s important that we tie things off and document things properly.”
The messages showed meetings on the affordable-car project being canceled. Two of the sources said some engineers have been reassigned.
“Elon’s directive is to go all-in on robotaxi,” one of the sources told Reuters.
Musk has often characterized Tesla’s primary mission as making affordable electric cars for the masses. His first “master plan” for the company in 2006 called for manufacturing luxury models first, then using the profits to finance a “low-cost family car.”
The apparent stark reversal comes as Tesla faces fierce competition globally from Chinese electric vehicle makers flooding the market with cars priced as low as $10,000.
Sources said they did not know all the reasons behind the decision to kill the project.AFP via Getty Images
The plan for driverless robotaxis, which could take longer to deliver, presents a stiffer engineering challenge and more regulatory risk.
One of the sources who confirmed the cancellation said new plans call for robotaxis to be produced, but in much lower volumes than had been projected for the Model 2.
Tesla’s Model 3 sedan is currently its most affordable electric vehicle for sale for around $39,000.
A fourth person with knowledge of Tesla’s plans expressed optimism about the decision to pivot away from the cheap-car strategy in favor of robotaxis, a segment Musk has envisioned as the future of mobility. The source cautioned that Tesla’s product plans could change again based on economic conditions.
Squeezing profits from entry-level vehicles is a challenge for any automaker. But Tesla’s delay in pursuing the car Musk once called his dream made it much tougher because it now faces far more competition in that price range.
While Tesla spent years developing its highly experimental Cybertruck, a pricey electric pickup, Chinese automakers have raced ahead on affordable EVs, grabbing market share, gaining economies of scale, and offering consumers bargain prices that Western automakers are struggling to match.
Tesla reported underwhelming sales figures in its most recent quarter.
In the first quarter, Tesla delivered around 387,000 electric vehicles – well short of analyst expectations and a steep drop from the nearly half a million cars it sold in the previous three-month period.
The company said that the disappointing results were due to temporary logistical problems such as the suspected arson at its Germany plant as well as the impact of ships having to avoid the Red Sea due to threats of violence.
Dan Ives of Wedbush Securities said that the most recent Tesla figures were an “unmitigated disaster…that is hard to explain away.”
In 2020, after releasing its hit crossover, the Model Y, Tesla focused on the highly experimental Cybertruck instead of an affordable car.Getty Images
Tesla’s next earnings release is slated for April 23.
Plans for the affordable Tesla have been seen as key to delivering on Musk’s stratospheric ambitions for sales growth. Musk said in 2020 that Tesla aspired by 2030 to sell 20 million vehicles – twice as many as the world’s largest automaker, Toyota, sells today.
With the reported death of the Model 2, it’s unclear how he’ll get there.
Tesla has yet to prove it can produce an autonomous car despite years of predictions by Musk that one was just around the corner.LightRocket via Getty Images
Expectations for a $25,000 vehicle have underpinned Wall Street analysts’ more modest, but still ambitious, forecasts for Tesla sales. Those forecasts, according to a Tesla investor-relations document, call for vehicle sales to rise to 4.2 million by 2028 from 1.8 million last year.
Musk has wavered on the project before. In a biography of the entrepreneur released last year, author Walter Isaacson reported that Musk in 2022 “put a hold on” the entry-level EV plans, reasoning that a Tesla robotaxi would make the car irrelevant. Musk’s advisors urged him to stay the course, the book said.
Currently, self-driving cars have only been approved by US and Chinese regulators for tightly limited, experimental use on public roads.
Tesla has yet to prove it can produce an autonomous car despite years of predictions by Musk that one was just around the corner, an expectation that partly underpinned Tesla’s soaring valuation.
The automaker faces lawsuits and investigations into crashes involving its Autopilot and Full Self-Driving driver-assistance systems, which are not fully autonomous. Tesla has blamed the accidents on inattentive drivers.
