Tesla abandons low-cost car plans amid intense EV competition in China: Reuters | Wilnesh News

Tesla Tesla has canceled a long-promised affordable car that investors had counted on to fuel its growth into a mass-market automaker, according to three people familiar with the matter and company sources seen by Reuters.

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

The decision means Tesla is abandoning its long-term goal of bringing affordable electric vehicles to the masses, something Chief Executive Musk has often cited as his primary mission.his first “Master Plan”, open a new tab In 2006, the company called for building luxury models first and then using the profits to fund “low-cost family cars.”

Tesla shares fell 4% after the Reuters report.

He has since repeatedly promised investors and consumers such a tool.As recently as January of this year, Musk told investors that Tesla planned to begin production of the affordable model at its Texas factory in the second half of 2025, after Reuters exclusive Describe these plans in detail.

Tesla’s current cheapest model, the Model 3 sedan, retails for about $39,000 in the United States. The now-discontinued entry-level car, sometimes called the Model 2, is expected to start at around $25,000.

Tesla did not respond to a request for comment.

The apparent reversal comes as Tesla faces stiff competition globally from Chinese electric carmakers, which are flooding the market with cars for as little as $10,000. Plans for driverless robotaxis may take longer to deliver, presenting tougher engineering challenges and greater regulatory risks.

Two sources said they learned of Tesla’s decision to scrap the Model 2 at a meeting attended by dozens of employees, which one source said took place in late February.

“Elon’s directive is to go all-in on robotaxis,” the person said.

A third source confirmed the cancellation and said the new plan calls for the production of robotaxis, but at a much lower volume than expected for the Model 2.

Reuters reviewed several company messages about the decision, including a report on March 1 that an unnamed economy car program manager discussed the project’s termination with engineering staff and advised them not to tell suppliers “the project was cancelled.” ”.

“Elon’s directive is to go all-in on robotaxis,” the person said.

A third source confirmed the cancellation and said the new plan calls for the production of robotaxis, but at a much lower volume than expected for the Model 2.

Reuters reviewed several company messages about the decision, including a report on March 1 that an unnamed economy car program manager discussed the project’s termination with engineering staff and advised them not to tell suppliers “the project was cancelled.” ”.

A fourth person familiar with Tesla’s plans expressed optimism about Tesla’s decision to abandon its strategy of cheap cars and move toward robotaxis, which Musk sees as the future of mobility. Sources warned that Tesla’s product plans could change again depending on economic conditions.

Squeezing profits from entry-level cars is a challenge for any automaker.But Tesla has been slow to pursue Musk’s cars The dream that once called him Making it even more difficult as it now faces tougher competition in that price range.

While Tesla spent years developing its highly experimental Cybertruck, a pricey electric pickup truck, the Chinese automaker has taken the lead in affordable electric vehicles, grabbing market share , gaining economies of scale and offering consumers low prices that Western automakers struggled to match.

As China’s electric vehicles rise to challenge Tesla’s dominance, Musk is tending to his vast empire, which includes rocket maker SpaceX, brain chip developer Neuralink and social media giant X, which Musk acquired in 2022. The platform, formerly known as Twitter, is now defunct. Under Musk’s erratic management, much of its value evaporated as the company lost revenue and advertisers.

The plan to make Tesla affordable is seen as key to Musk’s sales growth ambitions. Musk said in 2020 that Tesla hopes to sell 20 million vehicles in 2030, double the current sales of Toyota Motor, the world’s largest automaker. With the demise of the Model 2, it’s unclear how he will achieve this goal.

Expectations for a $25,000 car underpinned Wall Street analysts’ more modest but still ambitious forecasts for Tesla sales. Those forecasts call for vehicle sales to increase to 4.2 million vehicles by 2028, up from 1.8 million last year, according to Tesla investor relations documents.

Musk had previously balked at the plan. In a biography of the entrepreneur released last year, author Walter Issacson reported that Musk had “paused” plans for an entry-level electric car in 2022, citing Tesla robotaxis that would make the car become irrelevant. Musk’s advisers urged him to stay the course, the book said.

Tesla has yet to prove it can produce a self-driving car despite years of predictions by Musk that self-driving cars are coming, an expectation that has partly underpinned Tesla’s soaring valuation.Automobile manufacturers facing lawsuit and investigations into crashes involving its Autopilot and fully autonomous driving assistance systems (not fully autonomous). Tesla blamed the accident on inattentive driving.

Tesla’s Autopilot issues are one of many issues that are drawing close attention.The automaker faces another investigation into its vehicle range estimates, which follows a Reuters report last year that Tesla Operating the rangefinder in the instrument panel Its vehicles gave an optimistic forecast.Reuters reported in December that the automaker Accused of ‘abusive drivers’ Long-term failures in suspension and steering components have long been known to be defective.

Tesla’s image as a climate-friendly innovator has also been tarnished by Musk’s leanings into right-wing politics and polarizing public statements. Turning away some potential Tesla buyersAccording to surveys and experts.

The automaker reported 8% annual reduction Deliveries at its main Chinese rival BYD increased 13% on Tuesday. After the news came out, Tesla’s stock price fell by 5%, a drop of more than 40% since July last year, and a market value loss of approximately US$400 billion.

Still, Tesla’s $545 billion market capitalization is greater than the combined market capitalization of the next three largest automakers, Toyota, Porsche and Mercedes-Benz. (MBGn.DE), open a new tab. Tesla’s stock price has long been based on future expectations for mass-market sales and self-driving cars, rather than current sales and profits.

The company also owns Working to solve manufacturing problems, specifically the truck’s pioneering battery technology.Musk hopes to sell the car in large quantities, but Investors were warned last fall of “enormous challenges” Increase production and make vehicles profitable.

“We dug our own grave with the Cybertruck,” he said.

BYD’s electric vehicle sales in China surged during the same period, from about 130,000 to more than 1.5 million, not counting its booming plug-in hybrid business or fast-growing exports.

BYD has launched a series of low- and mid-range models, including the Seagull hatchback priced under $10,000. The Chinese automaker now plans to export the car at more than twice the price, but still below Tesla’s target of producing a cheap car.