Tesla’s Entry-Level EV Plans Shift, Leaving Investors Questioning Growth
Tesla’s much-anticipated $25,000 electric vehicle, widely referred to as the Model 2, may never reach production. Instead, the company appears to be pivoting towards the development of a low-cost Model Y variant and an autonomous vehicle concept known as the CyberCab. This shift has left investors reassessing Tesla’s growth trajectory amid growing uncertainty about future sales.
Model 2 Disappears as Tesla Focuses on a Cheaper Model Y
Reports from China, first published by tech site 36kr and later confirmed by Reuters, suggest Tesla is developing a lower-cost version of its best-selling Model Y. Codenamed “E41,” this new variant is expected to be at least 20% cheaper to produce than the upcoming refreshed Model Y, known internally as “Juniper.” Production of the E41 is slated to begin next year at Tesla’s Shanghai facility, though an earlier launch remains possible if Juniper’s performance underwhelms.
This news dashes long-standing speculation about Tesla’s plans for an entirely new entry-level model, possibly a compact hatchback. Since Tesla has remained vague about its future product lineup, many institutional investors had bet on a mass-market affordable EV expanding the company’s total addressable market.
Elon Musk’s Mixed Signals on Tesla’s Growth
Tesla CEO Elon Musk has teased investors for years with the idea of an affordable mass-market EV. In September 2020, he first mentioned plans for a $25,000 model, fueling expectations that Tesla would eventually dominate the lower-cost EV segment.
However, Musk’s statements have been inconsistent. In October 2023, he projected that Tesla’s vehicle sales could surge by 20-30% in 2025 thanks to “lower-cost vehicles and the advent of autonomy.” But he later downplayed the significance of a traditional $25,000 Tesla, calling it “pointless” and suggesting it would be at odds with Tesla’s AI-driven vision.
The CyberCab: Tesla’s New Growth Engine?
With the Model 2 seemingly scrapped, Tesla appears to be shifting its focus to the CyberCab, a fully autonomous vehicle designed for robotaxi fleets. Musk has suggested that CyberCab production could reach between 2 million and 4 million units per year.
Unlike traditional EVs, the CyberCab lacks a steering wheel and pedals, making it entirely dependent on regulatory approvals before it can operate on public roads. This presents a significant hurdle, as full self-driving technology remains a work in progress, and no clear legal framework currently exists to support a large-scale rollout of fully autonomous ride-hailing vehicles.
Investor Uncertainty and the Road Ahead
The potential absence of a low-cost Tesla model has forced investors to reevaluate the company’s growth strategy. Tesla’s stock previously dipped when reports emerged that plans for a next-generation platform, shared between the Model 2 and CyberCab, had been scrapped. While Musk later reassured investors by saying that a more affordable vehicle would arrive sooner than expected, his latest comments suggest that Tesla’s vision for growth hinges primarily on autonomy rather than mass-market affordability.
This leaves investors grappling with a major concern: If regulatory challenges delay or prevent widespread adoption of autonomous vehicles, what does that mean for Tesla’s sales growth in the coming years?
