Tesla is reportedly abandoning plans to make a less expensive $25,000 electric car

The Tesla Model 2 may no longer exist.

according to ReutersElon Musk has scrapped the company's plans to build a low-cost electric car in favor of a robotaxi. The news agency, citing three informed sources, said the decision was communicated to employees during an all-hands meeting in late February.

For years, Musk has promised an affordable electric vehicle, potentially priced up to $25,000, as a way to broaden the appeal of EVs. It was mentioned for the first time in A 2018 interview with YouTuber Marquis BrownleeSaying, “A $25,000 car, that's something we can do.” Then, in 2020, at the company's first Battery Day event, he predicted that Tesla would eventually produce as many as 20 million of these vehicles in a single year — or nearly double the current production of Toyota, General Motors, or Volkswagen.

Musk said the affordable electric vehicle will be built on the company's next-generation vehicle platform, which is still under development. During an earnings call earlier this year, Musk said the company was targeting production “at the end of 2025” but warned of delays due to the complexities of the manufacturing process.

“We are focused on bringing the next-generation platform to market as quickly as possible, with a plan to begin production at the Gigafactory Texas,” Tesla said in a statement. Note to contributors. “This platform will revolutionize how vehicles are manufactured.”

Tesla did not respond to Reuters' request for comment, but in a post on X, Musk accused the outlet of “lying.”

The shift in strategy comes as Tesla faces increasing pressure from Chinese automakers, which have been producing affordable electric cars for many years. Musk said allowing Chinese companies to sell cheap electric cars in the United States would be a death sentence for local automakers like his. There are no Chinese cars currently available for sale in the United States due to high tariffs.

“Frankly, if trade barriers are not put in place, it will destroy most of the other car companies in the world,” Musk said. “They are very good.”

While Tesla spent years developing the expensive and polarizing Cybertruck, the company lost its position as the world's largest electric vehicle maker to China's BYD. The company said it produced 3.02 million electric cars in 2023, compared to 1.81 million Tesla cars.

Earlier this year, Reuters reported that Tesla was planning to begin production on an all-new electric crossover in mid-2025. The company invited suppliers to bid for work on the vehicle and expected to produce 10,000 vehicles per week. Speculation has been that this could be Tesla's long-promised $25,000 car for mass-market consumers and that it could borrow some design elements from the recently released Cybertruck.

In addition to an affordable electric car, Musk also promised a Tesla robotaxi that would revolutionize car ownership. “By the middle of next year, we will have more than a million Tesla cars on the road with full self-driving hardware,” Musk said in 2019. Tesla's Full Self-Driving (FSD) feature will be so reliable that the driver can “go to sleep,” he added. (Tesla cars with the company's FSD software are not autonomous, and drivers are advised not to sleep in their cars.)

Last year, Musk biographer Walter Isaacson wrote Tell Axios The vehicle will have a futuristic Cybertruck-style design and will be developed alongside an autonomous robotaxi. Company Teased a pair of new vehicles At an investor event in March, one appeared to be a smaller car and the other a small commercial truck.

In Isaacson's book, Musk speculated that he could push the envelope on affordable electric cars in favor of robotaxis, arguing that a fully self-driving car would make the cheap electric car irrelevant.

Updated April 5th at 12:56 PM ET: Updated to include Musk's response to X.