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Tesla CEO Elon Musk has announced plans to introduce a robotaxi on August 8th, shortly after a Reuters report revealed the company’s decision to abandon its efforts to produce a low-cost electric vehicle (EV).
The report suggested that Musk directed Tesla to focus entirely on developing robotaxis utilizing the company’s small-vehicle platform, contradicting previous statements about an affordable EV.
The abandoned project, internally known as “Redwood” and speculated to be Tesla’s anticipated “Model 2,” aimed to produce 10,000 vehicles per week. The cars would be sold to customers at a starting price of $25,000.
Musk had committed to this endeavor, stating, “We’ll be sleeping on the line” to ensure its realization. Earlier, Tesla had hinted at developing two new EV models with potential sales reaching up to five million units annually.
Musk’s strategic approach has long emphasized leveraging profits from luxury vehicles to finance more accessible models. This approach was outlined in Tesla’s 2006 “Secret Tesla Motors Master Plan,” where Musk underscored the role of high-end cars in funding the development of budget-friendly options.
Musk has categorically denied Reuter’s report, saying that what they have reported isn’t true. However, he did not offer any countermeasures or arguments to elaborate his claim.
If the cancellation of the budget model is valid, Tesla’s cheapest offering remains the Model 3 sedan, starting at $39,000. The axed budget model was anticipated to enter the market at around $25,000. That would be a significant blow for the EV as it looks to enter the Indian market, along with several other price-sensitive markets.
How Tesla goes about its robotaxi business will be interesting indeed. Years ago, to cut costs, the company switched to a camera-only system and dropped radar and other sensors. All other robotaxi companies, like Waymo, extensively use a ton of other data from tons of different sensors.
Tesla faces other challenges as well. First, the entire EV market is facing a slowdown in demand worldwide. Second, Tesla faces very stiff competition in China, one of the most difficult and competitive markets for EVs, even though companies like BYD dominate the entry-level market.
Despite BYD’s reported sales growth, Tesla disclosed a decline in deliveries both year-over-year and quarter-over-quarter.
