At 11:38 pm on April 5, Beijing time, the media quoted people familiar with the matter as saying that Tesla has officially canceled its low-cost model production plan and that some engineers have been reassigned.

Two sources said they learned of Tesla's decision to cancel Model 2 production at a meeting attended by many employees in late February. They don't yet know the specific reasons behind ending the project.

After the news was announced, Tesla's stock price expanded its decline, falling by more than 6% within the day.

Later, Musk insinuated the media on social media platform X for "lying." After Musk hit back, Tesla's stock price fell less, with its stock price falling 3.2%.

Is Tesla’s “Model 2” cheap model a dream?

Previously, Tesla announced disappointing first-quarter delivery data. Tesla's delivery volume fell 8.5% year-on-year and more than 20% month-on-month, which was far lower than analysts' expectations. Wedbush analyst Dan Ives described the results as an "unexplainable disaster." After the data was released, Tesla's stock price fell 4.9% that day.

Faced with Tesla's "poor" performance that was lower than market expectations, investors viewed the "Model 2" cheap model as a life-saving straw for Tesla's decline. Analysts have predicted that Tesla's next wave of profit growth will be driven by the Model 2 model priced at around $25,000. They believe that driven by this cheap model, Tesla's vehicle sales will increase from 1.8 million last year to 4.2 million in 2028.

At the same time, Musk himself has repeatedly promised the market that he will launch this model, saying that Tesla is between two waves of growth. For example, Musk promised in January that Tesla would start producing this affordable model at its Texas factory in the second half of 2025.

Moreover, Musk said in 2020 that Tesla plans to sell 20 million vehicles by 2030, twice the sales volume of Toyota, the world's largest automaker. However, with the cancellation of the Model 2 project, the future of how to achieve this goal is uncertain.

Therefore, when the media reports that Tesla has canceled plans to launch low-priced electric cars, it not only means that Musk has given up on his long-term goal of "providing affordable electric cars to the masses," but it also undermines investors' expectations. As a result, analysts’ growth expectations were shattered.

Tesla shifts focus to developing self-driving robotaxis

The media pointed out that according to Tesla’s estimates, even if the cheap model continues to be developed, the model will not enter the market earlier than the second half of 2025. Moreover, the low-end electric vehicle market is currently saturated, and major car companies are competing for a little bit. The market share has "rolled out of the sky", and the competition in the entry-level electric vehicle market has become very fierce.

It is reported that Tesla has made major adjustments to its business strategy and decided to give up promoting the Model 2, a cheap electric car for the public, and instead focus its resources on developing self-driving robot taxi technology. One source said: "Musk's instructions are to go all-in on self-driving robot taxis." Another person familiar with the matter revealed that the production of robot taxis will be much lower than the expected production of Model 2.

The media said that although the company's robotaxi business model and timeline have not been clear yet, a fourth person familiar with Tesla's plans is optimistic about Tesla's autonomous driving technology. He believes that autonomous driving will become the mainstream mode of future travel. .

Moreover, Musk has publicly predicted that driverless taxis will be more common than human-driven cars in the future. He emphasized that it is crucial for Tesla to achieve full autonomous driving capabilities, and even said that if it fails to do so, Tesla's value will "basically return to zero."

However, Tesla's ambitions in the field of self-driving cars have yet to materialize, despite Musk's predictions for years that self-driving cars are coming.

On the one hand, U.S. regulators have only approved self-driving cars for strictly limited experimental use on public roads. On the other hand, the company's Autopilot and Full Self-Driving assistance systems have been subject to lawsuits and investigations due to their involvement in accidents, which Tesla blamed on driver negligence because these systems are not fully autonomous.

Tesla's high valuation is also based in part on market expectations for the future success of autonomous driving technology.

Additionally, sources warned that Tesla's product plans could change again depending on economic conditions.