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Tesla Nears 52-Week Lows as It Scraps Plans for a Cheaper EV Amid Fierce Chinese Competition [Update: Elon Musk Says Reuters is Lying]

Tesla Nears 52-Week Lows as It Scraps Plans for a Cheaper EV Amid Fierce Chinese Competition [Update: Elon Musk Says Reuters is Lying]

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Tesla (NASDAQ: TSLA) seems to have surrendered in front of a veritable onslaught of competition from China, eviscerating a major plank of its medium-term bullish thesis. Now, the EV giant’s FSD capabilities and the attendant licensing deals, as well as the lucrative cash stream from the still-non-existent robotaxis, might be the only salvation on the proverbial horizon.

We reported in January that Tesla was working to launch an entry-level $25,000 EV, dubbed «Redwood» internally and widely known as the Model 2, by June 2025, with the EV giant going so far as to send requests for price quotes to certain suppliers of key components based on a volume production level of 10,000 units per week, equating to around 520,000 units per year.

Redwood was to be an affordable compact crossover, with Tesla engineers expending quite a lot of effort to unlock economies of scale, including tearing down a «Honda Civic to study how to make cheap cars,» as per a Reuters report.

Now, however, Reuters has come up with a scoop that Tesla has scrapped its plans for a $25,000 EV, instead choosing to try to develop robotaxis on Redwood’s platform. This means that the Model 3, which starts at around $39,000 in the US, will remain Tesla’s cheapest model for the foreseeable future.

We noted earlier this week that Tesla has now recorded its first quarter with negative year-over-year growth in deliveries since the apex of the pandemic-induced mayhem in Q2 2020.

With price cuts no longer working to stave off a precipitous plunge in demand, Tesla is now offering to buy back its vehicles in China at 45 percent of the invoice price in three years to support resale values. Moreover, it is also offering zero-interest car financing for the buyers of Model 3 and Model Y in China.

Yet, there appears to be ample demand in China for newer, flashy EVs. Case in point: Xiaomi’s newly unveiled ~$30,000 SU7 electric vehicle – which borrows heavily from Porsche’s styling elements – is now sold out for the entire year, and that too within the span of just 24 hours! For context, Xiaomi is planning to produce 90,000 units of the SU7 this year.

Against this backdrop, Tesla bulls are increasingly looking toward the auto giant’s FSD capability as their ultimate salvation. Consider the fact that Morgan Stanley’s Adam Jonas, a Tesla perma-bull by any definition, has pegged a value of just $62 per share on the company’s core auto business!

Tesla Stock Price

Meanwhile, Tesla shares are down around 5 percent in light of today’s development. The stock is now rapidly closing in on its 52-week low of $152.37.

Update: Elon Musk Says that Reuters is Lying Again

Well, that escalated fast. Elon Musk is now calling out Reuters on its reporting vis-a-vis the Tesla Model 2.

While there still seems to be a lot of confusion, Tesla is apparently leveraging the Model 2 platform for its robotaxis and not necessarily canceling the Redwood project.

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