Tesla Has Officially Scrapped Its Best Project
Musk seems determined to destroy Tesla from the inside out.
Musk has developed several utterly moronic Tesla projects over the years. This includes the Tesla Solar Roof, the Tesla Bot, The Boring Company, Tesla lithium mining, the 4680 battery, FSD, the Robotaxi, the Cybertruck, and the second-gen Tesla Roadster, just to name a few. All were meant to solidify Tesla’s lead in the market and secure ample amounts of future revenue. However, they are all half-baked ideas that are nowhere close to hitting the market, and those that actually have hit the market are not what was promised and have failed to produce any serious momentum. But there is one zany project that stood out amongst the rest. If the Model 3 was Tesla’s Ford Model T moment, this would be their VW Beatle moment: the $25,000 Model 2. This would bring the EV revolution to the working classes, push sustainable transport to a new phase, and potentially make Tesla billions of dollars. Or, at least, it would have if Musk hadn’t officially killed it off. But why did Musk scrap this crucial project? And what does this mean for the future of Tesla?
Musk has been promising a smaller, cheaper model than the Model 3 for years, and plans to produce it have been leaked and announced numerous times. As such, we know it was going to cost $25,000 before tax, be approximately the size of a VW Polo, use a 53 kWh battery pack that was most likely going to be sourced from BYD, have 250 miles of range, and charge from 10% to 80% in around 25 minutes. We even know that Musk and Tesla were planning on selling over a million units of this vehicle a year and that it would potentially share the same platform as the upcoming Robotaxi.
But, back in April, when Tesla scheduled the Robotaxi “We Robot” event that happened two weeks ago, Reuters reported that they had been informed by someone inside Tesla that the Model 2 project had been completely scrapped to save money and pay for the exuberantly expensive development of the Robotaxi. Musk, who has had a long-time feud with Reuters for accurately reporting faults at Tesla, lambasted them for this report, calling it a lie. And, as a result, for months, we didn’t know if the Model 2 was coming or not.
As Tesla’s sales and profit figures started to roll in, it looked like Musk would be a moron to scrap the Model 2 project. You may have seen Tesla’s share price recently increase as they announced their 2024 Q3 revenue is up 17%. But that figure is just glitter on a turd. In the US, year-to-date Tesla Model Y sales are down 41%, and year-to-date Model 3 sales are down 22%. What’s more, despite selling regulatory carbon credits galore, their operational profit is only 10.8%, down from a peak of nearly 30% in 2022. In short, Tesla is losing its advantage and is being slowly squeezed out of the market. Tesla needs a proper mass-market EV to plug these falling sales figures, fix their falling profit margin, and keep their spot as king of the EV world. Because of this, many believed Elon that the Model 2 was still coming.
Unfortunately, there is just one problem. The Model 2 has been in the making for so long that it is no longer revolutionary. Multiple manufacturers have already made cars with almost identical specs for the same price, such as the BYD Dolphin, VW ID.2, MG MG4, Peugeot e-208, Citroën E-C3, Kia EV2, Renault 5, and MINI Cooper SE.
In fact, the Peugeot e-208 is currently a better buy than the hypothetical Model 2. This awesome little EV has 249 miles of WLTP range and a 10% to 80% charge time of only 27 minutes, which is basically the same as the Model 2. Yet you can currently buy one in the UK for only £22,136 after tax! If you take away the tax and convert that price into dollars, you will find the e-208 is actually the equivalent of $1,000 cheaper than the promised Model 2.
While the Peugeot is the best-selling small EV in the UK, it isn’t selling anywhere near as much as Musk predicted his Model 2 would. It is by no means a sales flop, as these things litter the roads of Europe and have helped Peugeot’s sales figures grow dramatically. The same is true for all the other Model 2 competitors already on the market.
There is no doubt that the Model 2 would have significantly helped Tesla, but Musk also knows they are far from first to the market and that even if they were, it wouldn’t sell in the volumes he was hoping.
So, Musk officially scrapped the Model 2. During the Tesla 2024 Q3 earnings call, Musk stated, “I think we’ve made it very clear that the future is autonomous. I think having a regular $25,000 model is pointless. It would be silly. It would be completely at odds with what we believe.” He simply wasn’t satisfied with a solid incremental step forward; he wanted more, and his greed may have cost the company its future.
This is nothing short of an entirely dimwitted idea. Even the engineers behind Tesla’s own self-driving system have called it unsafe, and even if the Robotaxi can be manufactured by 2027, as Musk claims, it is practically impossible for it to get regulatory approval. In fact, many self-driving experts have raised questions if it can ever pass regulatory approval as it has no redundant systems (to find out more about this, click here). But, not only that, it also isn’t a replacement for a small mass-market car! It only has two seats and practically no luggage space, and it can only charge via induction, making long-haul trips impossible. It has no override function, so driving off-road or into unmapped areas is impossible. It has a tiny battery, so range isn’t going to be great. It’s also incredibly low to the ground and has scissor doors, making accessibility horrific.
It also costs more at $30,000, though with Tesla’s track record, it will likely cost far more than that in the end. Musk has claimed this isn’t an issue, as your car can autonomously act as a taxi when you aren’t using it, making you money.
But what if you live away from taxi demand? What if you have allergies and can’t risk someone eating peanuts in the car or being accompanied by a dog? What if you regularly need to store valuables in the car? What if your schedule requires you to have a car at the ready? There is also the issue of country-wide demand. If Musk does sell enough Robotaxis to make up for the lack of a Model 2, then there will be a huge number of these cars on the roads. This oversupply could crash the price of renting out your Robotaxi, meaning owners might only make pennies and not offset the higher cost of the vehicle.
Simply put, even in the best-case scenario, the Robotaxi is simply not a replacement for the Model 2 for the user or Tesla as a company.
But, at the Q3 earnings call, Tesla did announce that “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.” This is likely a cheaper version of the Model 3, however, it potentially isn’t coming anyway thanks to Musk’s actions. Lithium and other crucial materials for EV manufacturing are set to plummet in price over the coming year, and as such, a cheaper version of the Model 3 isn’t going to have any advantage, as costs will tumble across the entire industry. Again, for Tesla to keep its sales figures and profits high, it needs a new, cheaper, mass-market EV in a different sector than the 3 or Y.
In reality, it could be well after 2030 when the Robotaxi finally makes its way into customers’ hands, if it ever does. There is simply no evidence that Tesla can deliver on its promises any sooner than that. There is also no evidence that Tesla can deliver a useable Robotaxi, as their vision-only approach to self-driving (read more here) has proven to be significantly worse and less safe than other self-driving systems that use a vast array of multiple sensor types. Sadly though, in officially scrapping the Model 2, Musk has cut off any other direction for Tesla to grow in. Tesla has to make the Robotaxi work or die a slow death as they fade into obscurity. Which is a shame, as they are now miles behind the leaders in automation, and the Robotaxi is a fatally flawed piece of design.
Thanks for reading! Content like this doesn’t happen without your support. So, if you want to see more like this, don’t forget to Subscribe and help get the word out by hitting the share button below.
Sources: Forbes, Auto Express, The Verge, NY Post, Will Lockett, Will Lockett, EV Database, GCBC, Carwow, EV In Focus, AW, Macrotrends