In a recent development, Tesla Inc. shares experienced a temporary decline in intraday trading following a report claiming that the carmaker had abandoned plans for a more affordable electric vehicle.
The stock initially dropped by as much as 6.2% after Reuters published an article stating that Tesla had cancelled the project, citing unnamed sources and internal company communications. However, shares managed to recover slightly, down 1.3% as of 1 p.m. on Friday in New York, after CEO Elon Musk took to X to dispute the report, labelling it as false.
“Reuters is lying,” Musk asserted in a post, without providing further details. He also responded with an eyes emoji to a Tesla investor's speculation that the company might be reallocating resources toward developing a robotaxi.
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Musk had initially hinted at a $25,000 model during a battery-related event in September 2020, expressing confidence in Tesla's ability to produce an electric vehicle at that price within approximately three years. However, the failure to meet this deadline has proven costly for the company, with Tesla reporting its first quarterly drop in vehicle deliveries in four years. Moreover, it faces increasing competition in China's electric vehicle market, where manufacturers like BYD Co. offer newer and more affordable options.
Walter Isaacson, Musk's biographer, mentioned in a book published last September that the billionaire had vetoed plans for a budget model for two years after the Battery Day event. Musk reportedly believed that Tesla's advancements in self-driving technology would make the $25,000 car redundant.
In response to Reuters' report, Musk allegedly issued a directive in late February to prioritize the development of a robotaxi. Despite Musk's optimism regarding Tesla's progress on a lower-cost vehicle, he acknowledged during the company's recent earnings call that production was projected to commence toward the end of 2025.
Furthermore, Tesla has been touting a revolutionary change in its manufacturing approach aimed at reducing costs. Musk referred to this as "far more advanced than any other automotive manufacturing system in the world by a significant margin" during the earnings call in January.
With Tesla's next earnings release scheduled for April 23, the company's strategic decisions and developments in the electric vehicle market continue to be closely monitored by investors and industry observers alike.
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