The company is not abandoning production of low-cost electric vehicles, the billionaire claims

Tesla CEO Elon Musk has dismissed a report by Reuters claiming the US carmaker has canceled a project for a low-cost vehicle owing to fierce competition from Chinese electric-vehicle (EV) makers.

On Friday, Reuters wrote, citing sources familiar with the matter and company messages, that the automaker will focus on developing self-driving robotaxis instead of pursuing Musk’s longstanding goal of bringing affordable electric cars to the masses.

“Reuters is lying (again),” Musk wrote on X (formerly Twitter), commenting on a post about the outlet’s report. 

According to Reuters, the now-defunct vehicle, sometimes described as the Model 2, was supposed to start at $25,000. Musk first teased the model at a company event in September 2020.

Sources claimed they learned of Tesla’s decision to scrap the Model 2 in a meeting attended by numerous employees, one of whom claimed the gathering happened in late February. 

“Elon’s directive is to go all in on robotaxi,” that person reportedly said.

Reuters is lying (again)

— Elon Musk (@elonmusk) April 5, 2024

Another source confirmed the cancellation and said that the new plans called for robotaxis to be produced, but in much lower volumes than had been projected for the Model 2.

Several company messages reviewed by Reuters about the decision reportedly included one from March 1. It came from an unnamed program manager for the affordable car who was discussing the project’s demise with engineering staff and advising them to hold off on telling suppliers about the cancellation of the program. 

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“The stark reversal comes as Tesla faces fierce competition globally from Chinese electric-vehicle makers flooding the market with cars priced as low as $10,000,” Reuters wrote, adding that the plan for driverless robotaxis presents a stiffer engineering challenge and more regulatory risk.

The article also pointed out that the US automaker was late to the segment partly due to a pivotal decision by Musk to focus on the highly experimental Cybertruck instead of an affordable car.

Chinese car giant BYD has overtaken Tesla as the world’s top EV producer, selling more than 526,000 vehicles in the fourth quarter of 2023. The result marked the first quarter in which BYD’s sales exceeded Tesla’s in unit terms, and capped a year in which the Chinese carmaker achieved almost double the growth rate of its US rival.

Musk dismissed BYD when asked in a 2011 Bloomberg interview about the company becoming an EV rival. At the time, he questioned the quality of the Chinese company’s products and pointed out what he perceived as its technological shortcomings.