Tesla is reportedly focusing on robotaxis over its planned budget EV

Tesla has scrapped plans to make an affordable electric vehicle (EV), according to Reuters. CEO Elon Musk said as recently as January that he was “optimistic” the low-cost EV would arrive in the second half of 2025. The automaker will instead reportedly “go all in” on robotaxis, which Musk has described as the future of transportation.

The canceled entry-level EV project — often called “Model 2” — was reportedly codenamed “Redwood.” The automaker had predicted a weekly production volume of 10,000 vehicles, and Musk said, “We’ll be sleeping on the line” to make it a reality. He had previously claimed Tesla was working on two new EV models expected to sell up to five million units annually.

For nearly two decades, the CEO has described his long-term goal as using luxury vehicles to build Tesla’s brand before using those profits to fund budget models. “When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car,” Musk wrote in a 2006 “Secret Tesla Motors Master Plan” memo. In the following years, he often echoed those sentiments to customers and investors.

The cancellation would leave the $39,000 and up Model 3 sedan as Tesla’s cheapest vehicle. The scrapped budget model was expected to start at around $25,000.

Reuters’ sources told the outlet they were told about the cancellation in a late February meeting “attended by scores of employees.” The publication says it reviewed internal Tesla messages about the pivot, including one advising staff to hold off on telling suppliers “about program cancellation.” Other messages allegedly told staffers that “suppliers should halt all further activities related to H422/NV91,” referring to the budget model’s external and internal codenames.

Musk posted on X (Twitter) on Friday, “Reuters is lying (again)” in response to the story — without listing any points of contention.

Tesla has its work cut out for it. Not only has EV demand slowed in the US, but competition in China is fierce, with the fast-growing BYD leading the country’s entry-level market. The Chinese automaker said earlier this month that its sales increased 13 percent year over year. Meanwhile, Tesla said on Tuesday that its deliveries dropped eight percent annually while falling 20 percent from the previous quarter.

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