Tesla has halted plans to launch a low-cost electric car that investors were eagerly awaiting, which would have helped the company expand its sales to a broader consumer market. The decision, confirmed by numerous sources and company reports that Reuters has examined, shifts Tesla’s focus to developing an autonomous taxi robot based on the same compact car platform.

The move away from producing an affordable electric car deviates from the main goal that Tesla and its CEO Elon Musk have repeatedly emphasized. The original vision of Tesla, as outlined by Musk in his 2006 “master plan,” was to create luxury models first to finance the production of an economical family car.

Despite Musk’s repeated assurances that such a car would be created, including a statement in January that production would begin in Texas by the second half of 2025, Tesla’s current most affordable model, the Model 3 sedan, costs about $39,000 in the United States. The canceled entry-level car, often referred to as the Model 2, was expected to cost about 25,000 euros and be produced at the company’s factory in Germany.

The information about the termination of the Model 2 project was provided to Tesla employees in a meeting, according to two sources, with one of them mentioning that the meeting took place in late February. Instructions were also given to delay informing suppliers of the project’s cancellation, indicating a significant change in Tesla’s product strategy.

Following the publication of the report, Musk criticized Reuters on his page on the social network X, accusing them of lying without specifying what the inaccuracies were.

However, Tesla’s strategic turnaround comes amid intense competition from Chinese electric vehicle manufacturers, which have introduced vehicles at much lower price points, some of which reach $10,000. Refocusing on the technologically and regulatory complex area of robotaxis could be a significant challenge for Tesla.

Despite the abandonment of the low-cost car initiative, some Tesla employees are optimistic about the transition to robotaxis, believing that it is in line with Musk’s vision for future mobility. However, this change in strategy is also recognized as flexible and subject to change depending on economic conditions.

The problem of making a profit from entry-level cars, combined with Tesla’s delay in developing this segment, puts the company at a competitive disadvantage. While Tesla has been focused on developing its premium Cybertruck pickup truck, Chinese automakers have taken the lead in the affordable electric vehicle market, capturing a significant market share and achieving economies of scale that Western manufacturers find difficult to compete with.