Tesla abandons plans for affordable car due to intense competition in Chinese EV market

Tesla’s decision to cancel its long-awaited affordable car has sent shockwaves through the automotive industry and the stock market. The company, known for its electric vehicles, had been promising a budget-friendly model to make electric cars accessible to the masses. However, according to sources familiar with the matter, Tesla has scrapped the project in favor of focusing on self-driving robotaxis.

Elon Musk, the CEO of Tesla, has long touted the idea of affordable electric cars as the company’s primary mission. However, the cancellation of the entry-level vehicle, sometimes referred to as the Model 2, represents a significant shift in strategy. Instead, Tesla will now concentrate on developing self-driving robotaxis on the same small-vehicle platform.

The news of the cancellation has caused Tesla’s stock to plummet, with shares dropping more than 6% initially. Musk took to social media to refute the Reuters report, calling it “lying.” Despite the backlash, Tesla’s decision reflects the growing competition in the electric vehicle market, particularly from Chinese automakers offering affordable EVs priced as low as $10,000.

The move to focus on robotaxis presents a new set of challenges for Tesla, including engineering hurdles and regulatory risks. While some within the company expressed optimism about the pivot, others are concerned about the impact on Tesla’s ambitious sales growth targets. With the cancellation of the Model 2, it remains unclear how Tesla will achieve Musk’s goal of selling 20 million vehicles by 2030.

The decision to scrap the affordable car project comes at a time when Tesla is facing scrutiny over its Autopilot system and range estimates. Despite these challenges, Tesla’s market capitalization remains high, driven by expectations for mass-market sales and advancements in self-driving technology.