Tesla has announced the cancellation of its long-promised affordable car, which was expected to be a key driver for the company’s growth into a mass-market automaker. The decision represents a departure from Tesla’s original goal of providing affordable electric cars for the masses, as outlined by Elon Musk in the company’s first “master plan” in 2006. The cancellation of the entry-level vehicle, known as the Model 2, comes as Tesla faces increasing competition from Chinese electric-vehicle makers offering cars at lower price points.
### The Decision to Cancel the Model 2
The cancellation of the Model 2 was revealed in a meeting attended by scores of employees in late February, according to sources familiar with the matter. Instead of pursuing the affordable car, Tesla will focus on developing self-driving robotaxis on the same small-vehicle platform. While some employees expressed disappointment at the decision, others see potential in the shift towards robotaxis as the future of mobility.
### Challenges in the Affordable EV Market
Tesla’s delay in pursuing the Model 2 has allowed Chinese automakers to surge ahead in the affordable EV market, posing a challenge for the company. While Tesla has focused on projects like the Cybertruck, Chinese brands have gained market share and offered consumers bargain prices that Western automakers struggle to match. The cancellation of the Model 2 raises questions about how Tesla will achieve Musk’s ambitious sales targets in the future.
### Musk’s Vision for Robotaxis
Elon Musk has long envisioned a future where self-driving robotaxis are a common mode of transport, potentially surpassing human-driven cars. Despite facing regulatory challenges and lawsuits related to its Autopilot and Full Self-Driving systems, Tesla remains committed to achieving full self-driving capability. The company’s timeline and business model for robotaxis are still unclear, but Musk believes they are essential for Tesla’s success.
### Impact on Tesla’s Market Value
The cancellation of the Model 2 has contributed to a decline in Tesla’s stock value, which has dropped over 40% since last July. The company’s market capitalization, however, remains higher than that of other major carmakers. Tesla’s image as a climate-friendly innovator has also been tarnished by controversies surrounding Musk’s public statements and political affiliations, which have deterred some potential buyers.
### Competition and Future Challenges
Tesla’s late entry into the affordable EV segment, coupled with slowing demand growth and intense competition, highlights the challenges the company faces in the global market. While Musk’s ambitious goals for Tesla’s sales growth rely on mass-market vehicles and driverless technology, the cancellation of the Model 2 raises concerns about the company’s ability to meet those targets.
In conclusion, Tesla’s decision to cancel the Model 2 represents a strategic shift towards focusing on self-driving technology and robotaxis. While this decision may impact the company’s growth prospects in the short term, it also reflects Elon Musk’s vision for the future of mobility. Tesla will need to navigate the changing landscape of the EV market and address concerns about its ability to deliver on its ambitious goals in the face of increasing competition and regulatory challenges.