In a notable strategic shift, Tesla is reorienting its priorities away from developing a budget-friendly electric vehicle and toward advancing its robotaxi initiative.
This move has sparked controversy, with Elon Musk refuting claims of abandoning the $25,000 EV model.
Tesla's Strategic Shift: From Budget EVs to Robotaxis
Tesla appears to be shifting its focus away from its planned budget electric vehicle (EV) towards robotaxis. Contrary to previous statements by CEO Elon Musk, who had expressed optimism about the $25,000 model arriving by the second half of 2025, Tesla has reportedly abandoned plans for the affordable EV.
Musk has refuted Reuters' claims, labeling them as false information. Instead, the company is said to be doubling down on the development of robotaxis, which Musk envisions as the future of transportation.
The scrapped project, internally known as "Redwood" and colloquially referred to as "Model 2," aimed for a weekly production volume of 10,000 vehicles. Musk had previously indicated Tesla's work on two new EV models with a projected sales volume of up to five million units annually.
Over nearly twenty years, Musk has consistently articulated his overarching objective of leveraging luxury vehicle sales to bolster Tesla's brand and finance the development of more affordable models. This vision was reiterated to both customers and investors over subsequent years.
Musk outlined this strategy in a 2006 memo titled "Secret Tesla Motors Master Plan," emphasizing that purchases of high-end Tesla vehicles like the Roadster would contribute to funding for future budget-friendly cars.
Alleged Directives on Budget EV Cancellation
With the reported cancellation of the budget model, Tesla's least expensive offering would be the Model 3 sedan, priced at $39,000 and above. The axed budget vehicle was anticipated to have a starting price of approximately $25,000.
News of the cancellation surfaced during a late February meeting that reportedly involved numerous Tesla employees.
According to Reuters, the outlet claims to have obtained access to internal Tesla communications regarding this strategic shift, which included directives urging staff to refrain from informing suppliers about the program termination.
Alleged internal messages instructed employees that all activities linked to the project codenamed "H422/NV91," representing the budget model, should be halted by suppliers. In a tweet on Friday, Musk accused Reuters of spreading falsehoods, although he did not specify the inaccuracies in the report.
Tesla faces significant challenges ahead. Not only has electric vehicle (EV) demand stagnated in the US, but competition in China is intensifying, with BYD emerging as a frontrunner in the country's affordable EV segment.
BYD reported a 13 percent year-over-year increase in sales earlier this month. In contrast, Tesla announced on Tuesday a decline of eight percent in deliveries compared to the previous year and a 20 percent drop from the previous quarter.
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