On Friday EST, Tesla's stock price dived sharply and fell more than 6% in the short term due to media reports that Tesla had abandoned its low-cost car plan. Subsequently, however, Tesla CEO Musk denied the report, driving Tesla's stock price higher in the short term, and the decline narrowed to 2%.

Currently, Tesla's Model 3 is the company's cheapest electric car model, starting at $39,000 in the US. However, Tesla also previously announced the Model 2 plan, which aims to provide a more affordable model to attract a wider range of consumers.

According to reports, the price of the Model 2 is expected to be very competitive. The price is about 25,000 US dollars (about 180,000 yuan).

At an event held in September 2020, Musk said that Tesla's ongoing series of innovations convinced him that the company could produce a cheap electric car in about three years.

As it turns out, more than three years have passed, and Model 2 has been out of sight. By January of this year, Musk said in an earnings conference call that Tesla is “progressing very well” in producing cheaper cars and is expected to start production by the end of 2025.

He also touted a new “revolutionary manufacturing system,” calling it “far more advanced and far ahead of any automotive manufacturing system in the world.”

Media reports

Let's take another look at the Reuters report earlier on Friday. Three sources revealed that Tesla has already cancelled its low-cost car plan, and Tesla will make every effort to develop the autonomous taxi Robotaxi.

Sources said that at a conference attended by dozens of employees, they learned that Tesla had decided to abandon plans for the Model 2. The meeting took place at the end of February.

According to reports, after canceling the Model 2 plan, Trass will switch to the autonomous taxi Robotaxi, but its production volume will be far lower than the Model 2.

Some analysts are optimistic about Tesla's decision to abandon the Model 2. They believe that Tesla is currently facing fierce competition from Chinese electric vehicle manufacturers in the global market. Apart from not being able to obtain much profit from cheap electric vehicles, it is also difficult for Tesla to compete with Chinese car manufacturers in this field.

According to the analysis, although Tesla took several years to develop the expensive electric pickup truck, the Chinese manufacturer has taken the lead in the field of cheap electric vehicles, seized market share, achieved economies of scale, and provided consumers with low prices that are difficult for Western automakers to match.

The affordable Model 2 is seen as the key to Tesla's sales growth. Musk said in 2020 that Tesla hopes to sell 20 million cars by 2030, which is double the current sales volume of Toyota, the world's largest automobile manufacturer. As Model 2 dies, it's unclear how he will achieve this goal.

In fact, in the book “The Biography of Elon Musk,” which was released last year, it was shown that Musk had already wavered about his Model 2 plans. The book mentions that Musk “shelved” plans for cheap electric cars in 2022 on the grounds that the advent of Tesla Robotaxi would make Model 2 irrelevant, but Musk's advisors urged him to stick to the end.

Musk has publicly predicted that in future modes of travel, autonomous taxis may eventually become a more common mode of transportation than human-driven cars. He added that Tesla is the most valuable car manufacturer in the world, and if it does not achieve full autonomous driving capabilities, its value will be “almost zero.”

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