In response to a Reuters article that claimed Tesla had abandoned plans for the elusive $25,000 car, company CEO Elon Musk has issued a rebuttal. He has also announced an upcoming reveal of what could turn out to be the Model 2 in spirit.

Reuter’s report

Reuters reported last Friday that the long-awaited Tesla’s $25,000 car, dubbed the Model 2, may never see the light of the day. It claimed multiple sources familiar with the matter. This painted a picture of the EV maker, whose cheapest car, the Model 3, starts at about $39,000 in the US, ceding grounds to other companies that have released more affordable electric vehicles or plan to do so.

According to one of Reuters’ sources, the decision to scrap the Model 2 was made known in a meeting involving many employees. Musk reportedly directed the company to focus on the robotaxi.

Another source added that while the robotaxi would be prioritized, the production volume would be lower than expected for the Model 2. Reuters also referred to internal messages in which a program manager advised the engineering unit to refrain from informing suppliers that the car had been canceled.

While another source was optimistic about the sudden pivot, it warned that Tesla’s plans could change again based on economic realities.

Why is the Model 2 cancellation important?

Affordable electric cars have become the latest battleground for EV makers, with many industry analysts calling them the future of electric vehicles. Tesla has for years been convinced of the crucial role of cheaper cars in bringing sustainable transportation to more people, hence, the constant reference to the Model 2 with an expected price tag of $25,000. It was a vital part of his now-famous Tesla master plan that called for using the profits from more expensive models to finance the development and production of an affordable family EV.

However, the alleged cancellation of the Model 2 could not have come at a more awkward time.

Tesla lost the title of largest EV maker by volume to BYD in the last quarter of 2023. Even though the American company regained the crown in Q1 2024, BYD is not showing signs of slowing down. It has released multiple sub-$15,000 electric models in several markets. These include the Seagull hatchback that will sell for less than $10,000.

The news of the cancellation also comes at a time when multiple outlets have reported a dip in EV demand. While there have been rebuttals to this claim, canceling a model that could stimulate demand in a new price segment seems like a counter-intuitive move, especially as Musk’s ambition is to sell 30 million vehicles annually by 2030.

Moreover, Musk recently revealed to investors that Tesla would start making the Model 2 in Texas in H2 2025.

Musk’s rebuttal on X

Musk, however, has denied Reuters’ report. He posted on X, which he controls, that “Reuters is lying (again).”

https://x.com/elonmusk/status/1776272471324606778

While Musk has not provided details, there might be some truths in Reuters’ report. According to Walter Isaacson’s biography, Musk was ready to put many resources into the development of a new platform for the robotaxi, a car that would not need a steering wheel or pedal because it would drive itself.

Musk believed the robotaxi, a taxi without a human driver, could become even more common than human-driven cars.

However, Tesla employees convinced Musk to develop the Model 2 on the same platform.

This was meant to hedge Tesla’s bet. The reasoning was that regulatory approval might stall the release of the robotaxi, but it would make financial sense for Tesla to sell the Model 2 in the interim.

However, with the response from the early users of FSD v12, Musk is apparently more confident in the autonomous robotaxi. Hence, he is redirecting resources to the robotaxi as he initially planned. This explanation was proposed by Tesla supporter Sawyer Merritt on X, to which Musk replied with the two-eye emoji, suggesting it was accurate.

Announcement of robotaxi unveiling

Hours later, Musk posted again to announce an upcoming unveiling. According to the CEO, the robotaxi would be revealed on August 8.

https://x.com/elonmusk/status/1776351450542768368

Musk has claimed the robotaxi will look futuristic, perhaps getting inspiration from the Cybertruck pickup truck. Isaacson’s book contains a futuristic-looking two-door car missing a steering wheel, although it was a concept. There is another photo of Tesla’s chief designer, Franz von Holzhausen, standing in front of a model matching the concept in appearance.

Tesla stocks tumbled 6 percent after Reuters published the news of the Model 2 cancellation. However, they have bounced back about 3 percent after Musk’s rebuttal and robotaxi announcement.