Tesla has decided to abandon plans to introduce an affordable electric car. The investors had hoped that this move would solidify the company's position as a mass-market automaker. According to three sources familiar with the matter and internal company communications seen by Reuters, Tesla has officially scrapped the long-awaited low-cost vehicle.

Instead of pursuing the entry-level car, Tesla will channel its efforts into the development of self-driving robotaxis built on the same small-vehicle platform, as revealed by the sources. This decision signifies a strategic shift away from Tesla's traditional vision of producing budget-friendly electric vehicles for a wider consumer base, a vision that CEO Elon Musk has often emphasized.

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Musk's stated commitment to making electric cars more accessible to the general public dates back to Tesla's founding in 2006, with the original plan incorporating luxury models to kickstart production and generate revenue for the eventual introduction of an affordable family car. Despite repeated assurances to stakeholders and customers about a lower-priced vehicle, recent developments suggest a departure from these goals.

The now-defunct Model 2, previously projected to be priced at around $25,000, has been shelved as Tesla opts to focus on its existing lineup, such as the $39,000 Model 3 sedan. Tesla's silence on this matter following media inquiries prompted Musk to comment on social media, refuting Reuters' report without providing specific details.

Despite the initial market reaction resulting in a more than 6% drop in Tesla's stock value, Musk's posts announcing a forthcoming Tesla Robotaxi unveiling helped offset some of these losses in after-hours trading. The move to abandon the Model 2 coincides with intensifying competition for Tesla on a global scale, particularly from Chinese electric vehicle companies offering models as inexpensive as $10,000.

The unexpected pivot toward robotaxis as the focus going forward presents new challenges that may require additional time and entail regulatory hurdles, signaling a shift in Tesla's near-term strategies and priorities in response to the rapidly evolving electric vehicle landscape.

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