Tesla’s long-promised $25,000 electric car, commonly dubbed the Model 2, now appears to be little more than a ghost of investor hopes. While Elon Musk publicly shot down reports that Tesla had killed the project, senior executives were reportedly baffled, knowing the affordable EV had already been scrapped internally.
With shifting priorities toward robotaxis, internal dissent, and a looming SEC shadow, this situation reflects the company’s deeper struggle to balance bold visions with grounded strategy.
On April 5, 2024, Reuters reported that Tesla had canceled plans for its all-new, low-cost EV. The article triggered a 6% drop in Tesla’s stock, only for Musk to post on X (formerly Twitter), “Reuters is lying”, moments later. That post partly reversed the decline, but also sowed confusion.
Internally, executives were alarmed. According to people familiar with the matter, Tesla had already informed staff weeks earlier that the Model 2 project was dead, and the company’s focus had shifted to autonomous robotaxis. When Musk contradicted this publicly, some senior managers were unsure whether he had reversed the decision. He hadn’t.
Despite their unease, Musk reportedly dismissed their concerns, reiterating that the affordable EV plan remained shelved. This contradiction between internal reality and external messaging raised red flags for both executives and investors.
“The key is they’ll be affordable… and you’ll be able to buy one,” Tesla engineering chief Lars Moravy later said in April 2025, describing cheaper variants of the Model 3 and Model Y, not an all-new vehicle.
Meanwhile, Tesla’s investor communications assured that “new vehicles, including more affordable models,” were still in development but without confirming any original, from-scratch $25K model.
Instead of building a new platform for a truly low-cost EV, Tesla has opted to trim down existing models. According to Reuters, Tesla is working on simplified versions of the Model 3 and Y, with no set pricing and delays pushing releases to the first half of 2025.
Investors, once hopeful for a game-changing budget EV, are now disillusioned. Gary Black of Future Fund LLC, once a Tesla bull, said he sold his fund’s $1.2 million stake, citing fears that the low-cost vehicle would just be a watered-down Model Y instead of a “differentiated product.”
Meanwhile, Chinese rival BYD is aggressively filling the affordable EV vacuum. It’s a $10,000 Seagull hatchback that has outsold Tesla in Europe and is making waves globally, proof that the mass-market EV dream is alive, just not in Fremont.
Tesla insiders were reportedly concerned that Musk’s social media denial could invite SEC scrutiny, especially since the Model 2 was factored into investor forecasts. Given Musk’s 2018 $40 million SEC settlement over a misleading tweet about taking Tesla private, the stakes are high.
That settlement requires legal vetting for social posts involving material company information. But Musk, according to those familiar with his thinking, claims he ignores that requirement, believing none of his posts need legal review.
While it remains unclear whether any executives alerted the SEC, the risk of enforcement lingers. An SEC spokesperson declined to comment.
Musk’s now-infamous “Robotaxi unveil 8/8” post, made the same day as the Reuters denial, boosted Tesla stock in after-hours trading. But the promised “Cybercab” debut fizzled after delays and a lackluster October unveiling. The grand robotaxi vision remains largely vaporware.
Meanwhile, Tesla’s market share has shrunk. 2024 marked Tesla’s first year of declining vehicle sales, with a further 13% drop in Q1 2025. Public backlash against Musk’s role in the Trump administration hasn’t helped.
Musk, who just announced his resignation as a special advisor to Donald Trump, now claims he’s refocusing on Tesla, SpaceX, xAI, Neuralink, and X. Whether that means reviving the affordable EV idea or burying it once and for all remains unclear.
