Elon Musk about axing affordable Tesla: ‘Reuters is lying’

Tesla was caught in a whirlwind last week when Reuters reported that the carmaker had axed the development of its affordable compact car. But after the news broke, CEO Elon Musk lashed back on his social media platform X: “Reuters is lying (again).” He countered by claiming his company would reveal its Robotaxi, based on the same architecture, on the eighth of August 8th this year.

On Friday, Reuters published a news story claiming that Tesla had shelved plans for the Model 2, its most budget-friendly car to date, with an estimated price tag of around 25,000 euros. The news agency based the rumor on at least four sources and documents for internal communication.

No driver’s version

“Elon’s directive is to go all in on Robotaxi,” one of those sources said. Apparently, the reversed move was announced at a meeting in late February. In fact, Musk’s comments on the story don’t point to inaccuracies; he shifts focus completely towards Robotaxi, which is an affiliated but different project altogether. This soothed the commotion at the stock exchange. Earlier-day losses were more or less compensated for after Musk ‘tweeted’ his reply.

The Model 2 and the Robotaxi are developed along the same lines and are slated to use twin architecture and components. The background is that Musk has envisioned these as one car without steering and pedals. As the company always tries to vanguard in the automotive field, its model for the masses was supposed to be autonomous driving. As his autobiography unveils, this idea was overturned by management, which succeeded in convincing Musk to build a driver’s version as well.

Suppliers told to halt

Internally, the Model 2 is called NV91 (and H422 to suppliers). Reuters picked up a company memo, dating from the first of March, which states that “suppliers should halt all further activities related to H422/NV91.” In another memo, the involved staff is thanked for their efforts and asked to evaluate lessons from their work. “I’d like to thank everyone for all your hard work and dedication to pushing boundaries and executing the best design possible given the aggressive constraints we had to work within,” reads the message. The so-called “lies” are well-documented by the press agency.

If Reuters is correct, Musk is leaning back on that idea, but there might be economic grounds now. Competition is much fiercer now than when the dream for a cheap EV spawned—it was always his lead. This was painstakingly demonstrated in Tesla’s first results of this year, with deliveries slumping and overstock growing. The latter has urged the company to slash prices on its bestseller, the Model Y, up to $5,000 in the United States.

The end game

The notion of prioritizing the Robotaxi over a low-cost electric car may have a strategic play. The Robotaxi represents a more distinctive and potentially lucrative venture than the crowded market of affordable electric vehicles, where margins are slimmer. This is especially true for the low-cost segment, where the Chinese have an even stronger foothold. Due to a preference for smaller cars, the model ranges of Chinese OEMs are much broader, and prices, on average, much lower.

An affordable electric car for the masses is Tesla’s end game. After some drawings appeared on the internet, the so-called Model 2 was estimated to hit the configurator in 2026, while Volkswagen is joining with the ID.2. In fact, a list of ten budget-friendly cars is expected to be released in the upcoming three years.

“Dug our own grave”

Musk was probably right when he said, “We dug our own grave with the Cybertruck.” That does not reference the rust debacle, where several new owners reported that the coachwork was not water-resistant. The expensive all-electric pick-up truck might have consumed resources, time, and development power that could have been better implemented in the low-cost model.

Indeed, the Robotaxi would give Tesla an edge over competitors, but a release date of only four months from now seems ambitious. Also, only a few cities in the US and China allow them, so the market for such a model is limited. At the same time, fully autonomous driving puts forward demands and legislative hurdles far more complicated. Summer will tell.