Tensions Rise Over $25,000 Tesla Electric Vehicle Cancellation
Senior executives at Tesla grew concerned after Elon Musk publicly dismissed reports that the company had terminated plans for a $25,000 electric vehicle (EV), a model highly anticipated by investors as a major growth driver.
Musk's Public Denial Sparks Internal Confusion
On April 5, 2024, minutes after a report revealed Tesla had scrapped the upcoming low-cost EV, Musk posted on X that the report was false, abruptly stopping Tesla's stock from falling sharply. Despite his denial, several top executives knew the project, often referred to as the "Model 2," had been canceled weeks earlier.
This disconnect caused internal confusion, with some executives directly questioning Musk about the project’s status and seeking clarity about messaging for suppliers and investors. Musk confirmed the cancellation privately but publicly insisted otherwise.
Company’s Shift Toward Affordable Versions of Existing Models
Rather than launching an all-new, purpose-built $25,000 vehicle, Tesla has pivoted to developing cost-reduced variants of the existing Model 3 sedan and Model Y SUV. These streamlined versions, expected to debut in the first half of 2025, aim to offer more affordable options, though final pricing has yet to be announced.
This strategy highlights Tesla's ongoing challenges in delivering a mass-market EV at a significantly lower price point, a core part of the company's original vision.
Investor and Market Implications
Some Tesla investors interpreted Musk’s post as a refusal to acknowledge the project’s cancellation and expressed concern about potential impacts on Tesla’s sales and stock performance. A notable investor reduced their Tesla holdings, citing worries that the affordable model might be merely a "stripped-down Model Y" lacking innovation.
Furthermore, some inside Tesla feared that Musk’s misleading public statements could attract regulatory scrutiny from the Securities and Exchange Commission (SEC), given Musk's previous settlement over inaccurate disclosures. However, it remains unclear whether these concerns were formally raised with Musk or regulators.
Recent Developments and Market Context
Beyond the cancelled $25,000 EV, Tesla has faced declining sales and increased competition. The company reported its first annual vehicle sales decline in 2024 and a 13% drop in first-quarter 2025 sales amid intensifying rivalry, including from Chinese automaker BYD, which recently outsold Tesla in Europe with a notably cheaper electric hatchback.
Despite these market pressures, Tesla continues to promote future product plans, including Musk’s announcement of an upcoming robotaxi unveiling, though delays and mixed investor reactions have tempered enthusiasm.
Summary of Key Points
- Elon Musk publicly denied cancellation of the $25,000 Tesla EV project despite internal confirmation.
- Tesla is now focusing on affordable, simplified versions of the Model 3 and Model Y instead of an all-new model.
- Internal executives expressed concern over communication and potential investor deception.
- Competition and sales declines pose significant challenges for Tesla’s growth strategy.
