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Tesla scraps plans for low-cost car amid fierce competition from Chinese EVs, report says

Tesla scraps plans for low-cost car amid fierce competition from Chinese EVs, report says

Reuters reported that has canceled its long-promised low-cost car expected to start at about $25,000. Musk called the report a lie.

(Image credit: CnEVPost)

Tesla has canceled a long-promised cheap car that investors had been counting on to propel its growth as a mass-market automaker, Reuters reported today.

The US electric vehicle (EV) maker will continue to develop self-driving robotaxis on the same small vehicle platform, Reuters said, citing sources.

The decision signals Tesla’s abandonment of its long-term goal, which CEO Elon Musk has often cited as its primary mission: affordable electric cars for the masses, the report noted.

As recently as January, Musk told investors that the company planned to begin production of the affordable model at its Texas factory in the second half of 2025.

Musk denied the latest Reuters report, stating on the X platform he owns, formerly known as Twitter, that «Reuters is lying (again).»

Tesla’s current cheapest model, the Model 3 sedan, retails for about $39,000 in the United States. The now-defunct entry-level vehicle, sometimes referred to as the Model 2, was expected to start at about $25,000, the Reuters report noted.

The stark reversal comes at a time when Tesla is facing stiff competition globally from Chinese EV makers, which are flooding the market with cars for as low as $10,000, the report said.

The sources said they learned of Tesla’s decision to scrap the Model 2 at a meeting attended by dozens of employees in late February, according to Reuters.

Tesla plans to go all-in on robotaxi, but production is well below expectations for the Model 2, according to the report.

Tesla referred to the affordable-car project internally as NV91 and externally as H422 in discussions with suppliers, Reuters said, citing two sources and company messages they reviewed.

Messages sent to employees by an unnamed Tesla program manager referenced the code names in discussing the project’s termination. One of the messages sent on March 1 said, «suppliers should halt all further activities related to H422/NV91.»

In another message dated March 1, the manager thanked the engineering staff for their efforts and urged them to document what they had learned, according to Reuters.

Musk said at Tesla’s 2020 Battery Day that a self-driving EV priced at $25,000 will be possible by 2023.

While rumors of that lower-priced model have popped up at times over the past few years, it has never become a reality.

At an investor event day in early March 2023, Tesla’s vice president of automotive engineering, Lars Moravy, reiterated the company’s desire to build its next-generation car at half the cost of the Model 3 or Model Y.

That lower-priced model is critical to Tesla’s ambitious sales plans, and Musk said in 2022 that the EV maker could open 10 to 12 new factories to increase production and ultimately meet its goal of selling 20 million EVs a year by 2030.

Last April, Chinese media outlet 36kr reported that Tesla’s lower-priced model would be a smaller version of the Model Y crossover, for which Tesla was building a plan for up to 4 million units of annual capacity.

Tesla’s North American factories will take on 2 million units of capacity, with the Monterrey plant in Mexico providing the bulk of it. Its factories in Berlin, Germany, and Shanghai will each take on 1 million units of capacity, the report said.

Tesla’s lower-priced model coming with planned annual capacity of 4 million units, report says