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Let’s discuss a Tesla (TSLA) claim by Reuters, Elon Musk’s short rebuttal, Musk’s robotaxi announcement, and after hours action.

Tesla Scraps Low-Cost Car Plans

Reuters reports Tesla Scraps Low-Cost Car Plans Amid Fierce Chinese EV Competition

Tesla has canceled the long-promised inexpensive car that investors have been counting on to drive its growth into a mass-market automaker, according to three sources familiar with the matter and company messages seen by Reuters.
The automaker will continue developing self-driving robotaxis on the same small-vehicle platform, the sources said.

The decision represents an abandonment of a longstanding goal that Tesla opens new tab chief Elon Musk has often characterized as its primary mission: affordable electric cars for the masses. His first “master plan”, opens new tab for the company in 2006 called for manufacturing luxury models first, then using the profits to finance a “low cost family car.”

Musk has since repeatedly promised such a vehicle to investors and consumers. As recently as January, Musk told investors that Tesla planned to start production of the affordable model at its Texas factory in the second half of 2025, following an exclusive Reuters report detailing those plans.

Tesla’s cheapest current model, the Model 3 sedan, retails for about $39,000 in the United States. The now-defunct entry-level vehicle, sometimes described as the Model 2, was expected to start at about $25,000.

The stark reversal comes as Tesla faces fierce competition globally from Chinese electric-vehicle makers flooding the market with cars priced as low as $10,000. The plan for driverless robotaxis, which could take longer to deliver, presents a stiffer engineering challenge and more regulatory risk.

Two sources said they learned of Tesla’s decision to scrap the Model 2 in a meeting attended by scores of employees, with one of them saying the gathering happened in late February.

“Elon’s directive is to go all in on robotaxi,” that person said.

The third source confirmed the cancellation and said new plans call for robotaxis to be produced, but in much lower volumes than had been projected for the Model 2.

Several company messages reviewed by Reuters about the decision included one on March 1 from an unnamed program manager for the affordable car discussing the project’s demise with engineering staff and advising them to hold off on telling suppliers “about program cancellation.”

A fourth person with knowledge of Tesla’s plans expressed optimism about the decision to pivot away from the cheap-car strategy in favor of robotaxis, a segment Musk has envisioned as the future of mobility. The source cautioned that Tesla’s product plans could change again based on economic conditions.

‘HALT ALL FURTHER ACTIVITIES’

Tesla called the affordable-car project NV91 internally and H422 externally when discussing it with suppliers, according to two of the sources and company messages reviewed by Reuters.

Messages from the unnamed Tesla program manager to staffers referenced those code names in discussing the project’s termination. One of those messages sent March 1 said that “suppliers should halt all further activities related to H422/NV91.”

Musk unveiled a prototype of the angular, stainless steel-clad truck in 2019 and predicted a starting price of about $40,000. The vehicle finally arrived last year, but the lowest price version of the truck won’t be available until 2025, at a price of about $61,000.

During the same period, BYD has seen its electric-vehicle sales soar in China, growing from about 130,000 to more than 1.5 million, not including its thriving business in plug-in hybrids or its fast-growing exports.

BYD already offers a slew of low- and mid-range models, including its Seagull hatchback for less than $10,000. The Chinese automaker now plans to export that car for more than double that price – but still lower than the target for the cheap car Tesla had planned to build.

Liar

*TESLA SCRAPS LOW-COST CAR PLANS: REUTERS

— zerohedge (@zerohedge) April 5, 2024

The rebuttal “This Reuters report is false according to Tesla CEO Elon Musk.” is more than a bit curious. It points to the response by Musk “Reuters is lying again”.

Then after hours Musk Tweeted:

RoboTaxi

Tesla Robotaxi unveil on 8/8

— Elon Musk (@elonmusk) April 5, 2024

TSLA After Hours

Musk’s damage control was successful, for now. But if anything, it appears to confirm the Reuters report.

Fully Autonomous Car

Tesla has yet to prove it can produce an autonomous car despite years of predictions by Musk that one was just around the corner, an expectation that partly underpinned Tesla’s soaring valuation. The automaker faces lawsuits and investigations into crashes involving its Autopilot and Full Self-Driving driver-assistance systems, which are not fully autonomous. Tesla has blamed the accidents on inattentive drivers.

Tesla’s Autopilot woes are among a number of problems that have drawn scrutiny. The automaker faces another investigation into the driving-range estimates of its cars, launched after Reuters reported last year that Tesla had rigged the in-dash range meters in its vehicles to give rosy projections. Reuters reported in December that the automaker blamed “driver abuse” for chronic failures of suspension and steering parts it long knew were defective.

Flashback 2016

Please note: After Model 3, Tesla Motors Will Make an Even More Affordable Car

We Dug Our Own Grave

On October 19, 2023, Motor Trend reported Elon Musk: “We Dug Our Own Grave With Tesla Cybertruck,” Which Finally Arrives in November

Roughly four years after we first saw the Tesla Cybertruck in all its stainless-steel glory, the automaker has confirmed its plans to start delivering the first batch of the massive pickup trucks to customers on November 30.

Musk says he has driven the Cybertruck and “it is an amazing product.” But “there will be enormous challenges in reaching volume production with the Cybertruck and in making the Cybertruck cash-flow positive.”

Making prototypes—which is what Tesla has been doing with the truck for years now—is easy, Musk says. Making the production version for sale to customers is “10,000 percent harder,” he insists, because the truck is so “radical” and “special.” Those are polite ways of saying stainless steel is hard to work with, and flat expanses of bodywork are unforgiving when it comes to gaps, fit, and finish.

Economies of scale won’t help bring down cost for a while. The CEO still thinks Tesla will eventually build 250,000 Cybertrucks a year, but said it won’t reach that production rate until sometime in 2025 at the earliest. 

“We dug our own grave with Cybertruck,” Musk told investors, calling it the type of special product with lots of bells and whistles that only comes along once in a while.

Tesla’s Deliveries Drop for First Time Since 2020, It’s Demand Not Supply

On April 2, I commented Tesla’s Deliveries Drop for First Time Since 2020, It’s Demand Not Supply

Tesla’s (TSLA) quarterly deliveries in the first quarter of 2024, are down 8.5% from a year earlier. It’s the first quarterly decline since 2020.

If Tesla can scale up semi production that would be a big boost. But Elon Musk has been promising 50,000 semis a year, every year for four years and has delivered a grand total of 100.

Tesla has a drought of new products and competition is catching up everywhere. It’s autonomous driving features are an outright joke. More importantly, they are a huge safety risk.

Tesla far lags Waymo on autonomous driving features and safety.

Every year since 2017 or so, Musk has said he would deliver fully autonomous driving in two years. Waymo is close. Tesla is not even in the ballpark due to flawed design.

RoboTaxi Zero Chance

Tesla has the worst autonomous driving capabilities around. I will do a separate report on where the technology stands.

Meanwhile, I await Musk’s August 8 robotaxi announcement. Expect to be underwhelmed and overpromised. A Tesla robotaxi is not close to being ready. Waymo is here and now.

I consider Musk a genius. But at best he overpromises and underdelivers for years on end, especially with autonomous driving, but also semis, the M2, and the cybertruck .

If he does not believe what he says, that’s even worse.

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