Internal sources at Tesla reveal that the company secretly said goodbye to the aforementioned $25,000 model, generically referred to as the "Model 2," in April 2024. Despite CEO Elon Musk's denial, the decision to scrap the affordable model caused unrest among some top executives last year. Documents and testimony show that Musk formally put the project on hold just weeks before his public "lie" statements, but he did not have to answer to investors.
When the news broke out on April 5, 2024, that Tesla was halting development of an all-new entry-level model, Musk responded vehemently within minutes via X: "A lie is being made." With this, he managed to somewhat halt a six percent stock market dip. Nevertheless, the Tesla share price was still down 3.6 percent at close that day.
Several top executives now know that Musk had already cancelled the limited EV several weeks earlier and shifted focus to fully autonomous robotic cabs. Employees had been informed that the "Model 2" concept had been permanently scrapped, a decision that insiders say stemmed from the financial picture and Tesla's desire to improve margins on new products. Nevertheless, Musk insisted that the project should not be publicly written off, fearing a share price crash and negative coverage.
Interviews with executives indicate that after Musk's denial, they asked him if he had changed his mind. However, they found no willingness to reopen talks; according to Musk, the plan was definitely off the table. The lack of transparency reflects Tesla's struggle to truly achieve a mass-market EV for around $25,000, a promise with which Musk kept investors curious for years.
Not all executives shared the sense of urgency. "Our product roadmap is flexible enough to respond to market developments," one of them explained. Still, general uncertainty lingered: consumers and suppliers did not know what to prepare for. Some executives, fearing the effects on sales, even said that potential buyers were delaying their purchase of a more expensive Tesla in hopes of an entry-level model that would never come.
Delay due to tight margins and shift to Robot Taxi
Tesla's original strategy revolved around an entirely new EV platform that would achieve lower production costs with new manufacturing technologies. However, instead of a defined model below the Model 3, Musk opted for a more conservative course: in April 2025, Tesla introduced compact, stripped-down variants of the existing Model 3 sedan and Model Y-SUV in the U.S. and Singapore. In doing so, the company shifted its mass-market ambitions twice: from entirely new design to reduced versions on existing production lines.
Engineering chief Lars Moravy emphasized during the quarterly earnings call that the "affordable variants are more or less similar in design to our current models." "The biggest difference is in the specifications and the fact that they actually become accessible to people with a smaller budget," he said.
Although Tesla has not yet put a price tag on the cheaper versions, analysts expected a figure around $30,000. That's well above the announced $25,000, putting pressure on the mass-market campaign. Consequence: in 2024, Tesla's annual sales shrank for the first time, falling 13 percent in Q1 2025 worldwide. At the same time, Chinese automaker BYD entered the European market with the Seagull hatchback of less than $10,000 domestically and just over $20,000 in exports. In doing so, BYD is increasing the pressure on Tesla's purported entry-level model.
Investors and SEC risks
Some Tesla leaders warned internally that Musk's denial may have violated U.S. regulations. An SEC spokesperson did not confirm whether a report was made to the regulator, but executives pointed to Musk's previous fine settlement of $40 million in 2018 for misleading tweets about Tesla's privatization plans. In accordance with that settlement, Musk must now have verified statements reviewed by a lawyer before posting them on social media. There are rumors that Musk does not want to adhere strictly to this, because he believes he "does not publish anything that needs legal approval."
Some leaders concluded that sooner or later investors would discover that the "Model 2" was never coming. That fear even made some reduce their Tesla positions: Gary Black, manager on behalf of Future Fund LLC, recently sold Tesla shares for $1.2 million. He fears that the promised affordable EV will be just a "stripped-down Model Y" and not the "fundamentally new product" that Musk promised in 2023.
Robot cab in the lead, mass-market EV continues to wait
On the same day that Musk denied news of the Model 2's rejection, he announced via X the unveiling of a "Robotaxi" for Aug. 8, 2024, a showpiece he had not previously announced widely internally. However, the final unveiling in Oct. 2024 disappointed: the futuristic "Cybercab" turned out to be little more than a concept, with no concrete delivery promises for consumers.
Meanwhile, Tesla is focusing on robotaxi testing in Texas and the Bay Area, and manufacturers are working on a generic, slightly downsized Model 3/Model Y line in China and the US. Concrete delivery dates are lacking, but the first units are not expected to appear until the second half of 2025. That means Tesla is once again wasting more time on product introductions just when competition in the affordable EV market is gaining momentum.
In essence, the dream of a $25,000-Tesla has not yet faded, but it has moved to a less ambitious project with limited distinctive value. Investors and internal managers alike watched Musk sacrifice the promise of a full-fledged entry-level model for robotaxi ambitions. With the introduction of cheaper versions of existing models, the company will have to prove that it can still deliver affordable EVs, before the late entrants from BYD and other Asian competitors completely dominate the European market.
