Drivers in Fountain Valley, CA were seen charging their Teslas on Wednesday, March 20, 2024. According to sources and messages seen by Reuters, Tesla has decided to cancel its long-awaited affordable car, which investors had been hoping for to drive its growth into a mass-market automaker. Instead, the company will focus on developing self-driving robotaxis on the same small-vehicle platform.
This decision marks a shift from CEO Elon Musk’s original goal of offering affordable electric cars for the masses. The cancellation of the Model 2, which was expected to start at around $25,000, has caused Tesla shares to drop by 4%.
The move to focus on robotaxis comes as Chinese electric-vehicle makers are flooding the market with low-priced cars, posing a significant challenge to Tesla. The decision to scrap the Model 2 was communicated to employees in late February, with plans now being redirected towards producing robotaxis, but in lower volumes than initially projected for the Model 2.
Overall, Tesla’s decision to pivot away from the cheap-car strategy towards robotaxis has been met with optimism by some insiders, while others caution that product plans could change based on economic conditions. The cancellation of the Model 2 has raised questions about how Tesla will achieve Musk’s ambitious sales growth targets.
The cancellation of the affordable-car project, known internally as NV91 and externally as H422, has led to meetings being canceled and engineers being reassigned. Tesla’s timeline and business model for robotaxis remain unclear, despite Musk’s prediction of a driverless future dominated by self-driving taxis.
On the business side, Tesla faces challenges such as slowing EV demand growth, intense competition in China, and issues with its Autopilot and Full Self-Driving systems. Despite these challenges, Tesla’s market capitalization remains high, reflecting investor confidence in its future potential.
The cancellation of the affordable-car project also highlights Tesla’s struggles with manufacturing and competition in the EV market. By focusing on projects like the Cybertruck and facing delays in bringing lower-priced models to market, Tesla has fallen behind competitors like BYD in offering affordable electric vehicles.
Overall, Tesla’s decision to cancel the Model 2 and focus on robotaxis reflects the company’s shifting priorities and the challenges it faces in an increasingly competitive and rapidly evolving industry.
Tesla has canceled its long-anticipated inexpensive car, known as the Model 2, that was expected to drive the company towards becoming a mass-market automaker. Instead, the company will focus on developing self-driving robotaxis on the same small-vehicle platform. This decision represents a shift away from Tesla’s goal of providing affordable electric cars for the masses, which has been a key promise from CEO Elon Musk since the company’s inception. The cancellation of the Model 2 comes as Tesla faces intense competition in the global electric vehicle market, particularly from Chinese automakers offering vehicles at much lower price points. Musk has expressed his vision for a future in which robotaxis are the primary mode of transportation, and the company plans to produce these vehicles in lower volumes than originally projected for the Model 2. Despite the cancellation of the Model 2, Tesla’s plans for robotaxis and its business model for the future remain uncertain, with the company facing challenges including regulatory risks and engineering hurdles. The decision to prioritize robotaxis over affordable cars reflects Musk’s belief that driverless taxis are the future of mobility. Tesla’s stock value has been based largely on expectations for mass-market sales and driverless technology, rather than its current sales and profits. The cancellation of the Model 2 represents a significant shift in Tesla’s strategy and raises questions about how the company will achieve Musk’s ambitious goals for sales growth in the future.
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