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Tesla scraps low-cost car plan

Tesla has canceled plans to make a low-cost car that investors were counting on to fuel its growth into a mass-market automaker, three sources familiar with the matter and company messages seen by Reuters said.

The automaker will continue to develop self-driving robotaxis on the same small vehicle platform, the sources said.

The decision represents the abandonment of a goal that Tesla boss Elon Musk has often characterized as his primary mission: affordable electric cars for the masses.

His first “master plan” for the company in 2006 envisioned first manufacturing luxury models and then using the profits to finance a “low-cost family car.”

Since then, it has repeatedly promised such a vehicle to investors and consumers. In January, Musk told investors that Tesla planned to start production of the affordable model at its Texas factory in the second half of 2025, following an exclusive Reuters report detailing those plans.

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

Model 2, a cheaper version than Model 3, is discarded

The harsh setback comes as Tesla faces fierce global competition from Chinese electric vehicle makers that flood the market with cars priced as low as $10,000. The driverless robotaxis plan, which could take longer, presents a greater engineering challenge and more regulatory risks.

Two sources said they learned of Tesla’s decision to scrap the Model 2 at a meeting attended by dozens of employees, with one of them saying the meeting was in late February.

Will promote robotaxis

“Elon’s directive is to go for the robotaxi,” that person said.

The third source confirmed the cancellation and said that the new plans call for the production of robotaxis, but in much smaller volumes than those projected for the Model 2.

Several company messages were reviewed by Reuters about the decision, including one on March 1 from an unnamed program manager for the affordable car, in which he discussed the project’s demise with engineering staff.

A fourth person with knowledge of Tesla’s plans was optimistic about the decision to abandon the cheap car strategy in favor of robotaxis, an area that Musk has envisioned as the future of mobility. The source warned that Tesla’s product plans could change again depending on economic conditions.

If Tesla had gone ahead with the low-cost car, it wouldn’t have hit the market until the second half of 2025, according to the company’s estimates. But the entry-level EV business is already saturated with attractive models from BYD and many other Chinese brands.

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– 2024-04-13 19:23:54

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