Tesla reportedly drops plan to build $25K EV

Tesla is reportedly abandoning its plan to build a lower-cost EV, thought to be priced around $25,000, according to Reuters, despite that vehicle's status as a pivotal product for the company's overall growth.

The company will instead focus its efforts on a planned robotaxi that is being built on the same small EV platform that was supposed to power the lower-cost vehicle.

Tesla CEO Elon Musk claimed, without proof, that Reuters is "lying" in a post on his social media platform, X, and did not dispute any specific details. He also responded with an eyes emoji to another post that effectively summed up the Reuters report in different words.

Tesla has reportedly been working on these two vehicles for a few years. But Musk has wavered on whether to prioritize a typical car or one with no steering wheel or pedals, despite not having yet produced a fully autonomous car.

Musk first teased the idea of a truly low-cost Tesla in 2020. But by early 2022, he said Tesla had stopped work on the car because it had too much else to do.

That didn't last long. The project spun back up, but the company and its CEO were split on whether it should be a typical car or a futuristic robotaxi.

In Walter Isaacson's recent biography of Musk, he described the CEO pushing back in mid-2022 against his engineers' insistence on referencing a car with a steering wheel and pedals. "This vehicle must be designed as a clean robotaxi. We're going to take that risk, it's my fault if it fucks up," Isaacson quoted Musk as saying. A few weeks after that, Isaacson said, he quoted Musk saying the robotaxi will "transform everything" and make Tesla a "ten-trillion company."

But even after all that, Isaacson wrote that lead designer Franz von Holzhausen and engineering VP Lars Moravy kept the more traditional car version alive as a "shadow project." In September 2022, Isaacson wrote, Moravy and von Holzhausen made the pitch to Musk that they needed an inexpensive, small car in order to grow at Musk's stated goal of 50% per year. They also laid out the plan to use the same platform to power both distinct models.

Musk still said, according to Isaacson, that the $25,000 car was "really not that exciting of a project" – despite it being the ultimate goal of his famed original "master plan" for Tesla. But by early 2023, Musk had agreed to move forward with the plan laid out by his lieutenants.

That plan is now in question as Reuters cites internal documents showing that work has stopped on the traditional car project in favor of the robotaxi approach.

Things have changed since Musk agreed to that plan in 2023. Isaacson's book explains that Musk's reason for trying to spin up a factory in Mexico had to do with wanting to make both vehicles there. But Musk quickly pivoted to building the two vehicles in Texas instead. Musk has since told investors that Tesla has backed away from going "full tilt" in developing the Mexico plant in part because of high interest rates. And Tesla has spent the last year slashing prices on its best-selling models in an effort to stay competitive in China and maintain its huge advantage over the competition outside of that country.