REUTERS: According to information from three sources familiar with the matter and messages from the company seen by Reuters, Tesla has decided to cancel its long-awaited affordable car, which investors had anticipated would drive its expansion into a mass-market automaker. The sources mentioned that the company intends to continue its focus on developing self-driving robotaxis using the same small-vehicle platform. As Tesla cancels low-cost electric car plans, it signifies a departure from Tesla CEO Elon Musk’s longstanding objective, outlined in the company’s initial “master plan” from 2006, of producing affordable electric vehicles for widespread adoption. The original plan involved initially manufacturing luxury models to fund the development of a more affordable family car.

The most affordable Tesla model available presently is the Model 3 sedan, which is priced around $39,000 in the United States. The previously planned entry-level vehicle, often referred to as the Model 2, was anticipated to have a starting price of approximately $25,000.

Two insiders disclosed that Tesla’s decision to abandon the Model 2 came to light during a meeting attended by numerous employees, with one source indicating that the gathering occurred in late February.

They mentioned, “Elon’s directive is to go all in on robotaxi.”

The third source corroborated the cancellation and revealed that revised plans involve producing robotaxis, albeit in significantly lower quantities than originally anticipated for the Model 2.

Multiple internal communications examined by Reuters regarding the decision included a message on March 1 from an unnamed program manager for the affordable car, addressing the project’s termination with engineering staff and advising them to refrain from informing suppliers “about program cancellation.”

Another individual knowledgeable about Tesla’s strategies expressed optimism about shifting away from the low-cost car strategy towards robotaxis, a sector Musk envisions as the future of transportation. However, the source cautioned that Tesla’s product strategies could change again based on economic circumstances.

Generating profits from entry-level vehicles poses a challenge for any car manufacturer. Tesla’s delay in pursuing the car Musk once envisioned as his dream has made it considerably more difficult due to heightened competition in that price bracket.

While Tesla devoted years to developing its innovative Cybertruck, a high-priced electric pickup, Chinese automakers surged ahead with affordable EVs, capturing market share, achieving economies of scale, and offering consumers competitive prices that Western automakers struggle to match.

As Chinese EVs gained ground to challenge Tesla’s dominance, Musk attended to his diverse empire, which includes SpaceX, Neuralink, and X (formerly Twitter), acquired in 2022. However, under Musk’s tumultuous management, the social media platform has struggled, losing significant value as revenue and advertisers dwindled. As Tesla cancels low-cost electric car plans, it faces criticism and questions on this huge step.

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