A Day of Reckoning Is Coming For Tesla
And a rejuvenated 'Model 2' won't stop that.
An upcoming $25,000 EV, dubbed the ‘Model 2’, was once one of the main justifications for Tesla’s ludicrous speculative value. Musk announced this model in 2020, with it slated to launch in 2023. Then, 2023 rolled around, and rather than launching the Model 2, Musk announced Tesla had one in the works, which he expected to launch in 2025 and predicted would sell well over a million units a year. Investors were practically drooling at the idea of Tesla gaining such a monopolistic chunk of the car market, which catapulted Tesla’s value. But less than a year later, in 2024, Musk scrapped the Model 2 and redirected all development funds toward Tesla’s limp robotaxi and robot projects. Now, two years later, reports are circulating that Tesla is trying to bring the dead-and-buried Model 2 back to life. You could rightly see this decision as yet another example of inept flip-flopping from an out-of-touch billionaire CEO with far too much unchecked power. But in light of Tesla’s rapidly downward-spiralling financial health, the abject failure of Tesla’s Robotaxis, and institutional investors’ sudden realisation that reality exists, this revived Model 2 looks more like a futile, impotent, and desperate attempt to avoid the imminent death blow coming for Tesla. Let me explain.
The Leak
How do we know that Tesla is trying to revive the Model 2? Well, outlets like Reuters have reported that anonymous sources working with companies in Tesla’s supply chain claim Tesla is developing a new small EV that isn’t based on the Model 3 or Y. The scant details that we know so far about this car is that it will be smaller than a Model Y at 4.3 m long, it will be built in China, be a “wide margin” less expensive than the Model 3, and that Tesla has not yet greenlit this new EV for production. That’s about it.
Compare that to the ‘old’ Model 2, which was slated to be less than 4 m long, have a base price of $25,000, and be produced in Mexico. That means this new, smaller EV might not even pick up where the old Model 2 project left off.
This is also a remarkable U-turn for Musk. Back in 2024, against the advice of almost every executive (read more here), he cancelled the ‘old’ Model 2, calling affordable EVs “silly” and “pointless”, and claimed that autonomous robotaxis would soon replace vehicle ownership for the majority of people on the affordable end of the market.
So, why backtrack? And why now?
Why This Makes Sense
In simple terms, Tesla isn’t exactly doing well right now, given that every plan Musk has proposed is failing, and the Model 2 might be the only thing that can help soften the blow of these failures.
Tesla’s global sales dropped by 8% in 2025 compared to 2024 to 1.64 million vehicles, and recent sales figures suggest that trend is only intensifying. On top of that, one of Tesla’s main sources of income, emissions credits, is beginning to totally disappear (which we will cover in more detail in a minute). All of this might not sound too bad, but as I covered in a previous article, this has caused Tesla’s net profit to drop 46% compared to 2024 to just $3.79 billion, and its 2026 profit is set to shrink even further.
It wasn’t supposed to be like this. Tesla was supposed to deliver far more vehicles, rake in billions of dollars from Robotaxis and sell its Optimus robot like hotcakes by now.
Back in 2022, analysts projected that Tesla would sell 1.366 million vehicles in Q1 of 2026, driven by the Cybertruck and the mythical Model 2. Tesla fell short of this prediction by 71%, missing it by more than one million units!
