Tesla scraps low-cost car plans amid fierce Chinese EV competition, report says

Tesla Inc. has canceled the long-promised inexpensive car that investors have been counting on to drive its growth into a mass-market automaker, according to three sources familiar with the matter and company messages seen by Reuters.

Two sources said they learned of Tesla's decision to scrap the Model 2 in a meeting attended by scores of employees, with one of them saying the gathering happened in late February.The third source confirmed the cancelation and said new plans call for robotaxis to be produced, but in much lower volumes than had been projected for the Model 2.

While Tesla spent years developing its highly experimental Cybertruck, a pricey electric pickup, Chinese automakers have raced ahead on affordable EVs, grabbing market share, gaining economies of scale and offering consumers bargain prices that Western automakers are struggling to match. Musk has wavered on the project before. In a biography of the entrepreneur released last year, author Walter Issacson reported that Musk in 2022 “put a hold on” the entry-level EV plans, reasoning that a Tesla robotaxi would make the car irrelevant. Musk’s advisors urged him to stay the course, the book said.Tesla called the affordable-car project NV91 internally and H422 externally when discussing it with suppliers, according to two of the sources and company messages reviewed by Reuters.

Tesla’s timeline and business model for robotaxis remain unclear. Musk has publicly predicted a future of mobility in which driverless taxis could eventually become a more common mode of transport than human-driven cars. He has said Tesla, the world’s most valuable automaker, would be"worth basically zero" without achieving full self-driving capability.

Tesla's image as a climate-friendly innovator has also suffered with Musk’s tilt toward right-wing politics and polarizing public statements, which have turned away some prospective Tesla buyers, according to surveys and experts.

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