Tesla Investors Left in the Dark Over $25,000 Car Project

Tesla’s plans for a budget-friendly $25,000 electric car, known as the Model 2, have recently come into question, sparking concerns among investors. On April 5, CEO Elon Musk stirred confusion with a post on X, responding to a Reuters report about the cancellation of the Model 2 by saying, “Reuters is lying.”

The same report by Reuters suggests that Tesla might be ditching the affordable car-project for self-driving robotaxi on the same small-car platform. The same day, Elon Musk posted about unveiling the “Tesla Robotaxi” on August 8, suggesting that a version of the self-driving vehicle might be ready by then, but he did not provide further details.

Since then, Tesla has not updated investors about the status of the Model 2, causing frustration and uncertainty. This comes at a time when the demand for electric vehicles is decreasing worldwide, and Tesla is facing tough competition from lower-priced Chinese EVs. Model 2 was expected to be a critical product that would attract more customers and maintain Tesla’s growth.

Analysts at Wedbush described the cancellation as disastrous for Tesla’s growth, doubting that a robotaxi could effectively replace the Model 2. Dan Ives, a senior analyst at Wedbush, told Reuters how critical the situation is for investors, noting that Musk’s lack of communication is particularly worrying because of the importance of the Model 2 to Tesla’s expansion plans.

Adding to the unease, Dan Ives has called on Musk to clarify another pressing issue: the recent decision to cut 10% of Tesla’s global workforce following a quarter where vehicle deliveries plummeted by 20%.

Deutsche Bank highlighted that the cancellation of the Model 2 would shift Tesla’s investor base from those focused on mass-market growth to those interested in long-term AI/tech investments for robotaxi development.

Ross Gerber, an investor and CEO at Gerber Kawasaki Wealth & Investment Management, emphasized the stakes, telling Reuters that “if they don’t launch this car, there’s no point in investing in Tesla.”

As of now, Tesla has not officially responded to inquiries about this issue or the earlier report, leaving those invested in the company eager for answers.

According to Reuters, some investors support Tesla’s potential shift from Model 2 to the development of the robotaxis.

Gene Munster of Deepwater Asset Management, a Tesla shareholder, views the shift in focus as a strategic move to position Tesla at the forefront of the next generation in transportation. Jake Bleicher from Carson Wealth Management Group mentioned that if Tesla showed real progress on robotaxis by the August 8 date, it could boost the company’s stock.

Reuters also mentions that Tesla’s struggle is compounded by competition, particularly from Chinese manufacturers. Its cheapest model, the Model 3, is priced at around $39,000. Still, Tesla’s price reductions across some models haven’t alleviated the pressure from competitors like BYD, which offers EVs starting at $10,000 in China.

Xiaomi’s new $30,000 sport sedan, which garnered over 100,000 orders quickly, further highlights the challenges Tesla faces in maintaining market dominance.