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Anyone holding out hope for the fabled budget-friendly Tesla will have to rethink their plans today. A new report claims the automaker has abandoned its project to make a less expensive electric vehicle. This was seen as a necessary next step for Tesla, which has risen to prominence with more expensive electric vehicles. Tesla allegedly made this decision due to increasing pressure from Chinese EV makers like BYD, but the canceled Model 2 might live on as a robotic taxi.
When Musk took the reins at Tesla, he made it known that luxury EVs were the company’s first order of business. He intended to use the profits from selling those vehicles to develop a “low-cost family car.” The company never quite got there. Tesla’s cheapest option is the single-motor Model 3, which starts at around $35,000, but that’s before any extras like chargers, Autopilot add-ons, and paint color changes.
According to Reuters, the Model 2 (NV91 internally) was expected to start at around $25,000. That would have put the vehicle in direct competition with modestly priced internal combustion vehicles. However, Tesla reportedly became skittish upon seeing BYD and other Chinese firms launch EVs priced as low as $10,000. While it’s unlikely these companies will expand to North America any time soon, Tesla now relies on China for a sizable chunk of its business. Launching a car that can’t compete in China would be a disaster.
Messages from multiple Tesla workers discuss the logistics of canceling the vehicle. Early in March, one manager warned engineering staff to hold off telling suppliers about the “program cancellation.” However, another stressed that supplies should stop delivering new parts for the project. The messages call for workers to document their work on NV91. “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,” it read.
Credit: Tesla
Keeping all that data could aid the alleged robotaxi program. One manager explained that Musk strongly favored rearchitecting the Model 2 project to become a robotaxi. The vehicle would be built on the same compact frame designed for the Model 2 but manufactured in much lower volumes. This could be an effective way to show off Autopilot to the general public, something that Musk is very interested in lately.
There are signs that Tesla’s incredible growth is beginning to stall, and the company’s extremely high value is tied to that growth. Tesla missed market expectations for EV shipments in the first quarter of the year by a wide margin, and there is some concern among analysts that Tesla may be running out of customers willing to pay $40,000 or more for an electric vehicle. They may not be as glamorous, but midrange cars pay the bills at most automakers. If Tesla can’t make that transition, investors may start looking elsewhere for the future or transportation.
Update 5:11 p.m. ET: Elon Musk has seemingly confirmed the Reuters report with this post on X: