Elon Musk denies report that Tesla's $25,000 car is dead

• Elon Musk denied a Reuters report that Tesla was scrapping plans for a $25,000 car.
• The inexpensive model has been an important part of Tesla's plans for several years.

Tesla CEO Elon Musk denied a report that the electric-vehicle company was scrapping plans for a long-awaited $25,000 model.

Reuters reported Friday, citing sources familiar with the matter and company messages, that Tesla was throwing in the towel on its long-planned more-affordable model.

"Reuters is lying (again)," Musk posted on his social-media platform, X, formerly Twitter, in response to the story.

Despite this denial from Musk, Reuters cited Tesla's own internal company messages halting the project.

In one case, a Tesla program manager told staff that "suppliers should halt all further activities related to H422/NV91," referring to code names for the project, Reuters reported.

Two sources also told Reuters that the decision to scrap the affordable Tesla, sometimes known as the Model 2, was announced in a meeting attended by "scores of employees."

The report said the small-vehicle platform that would have carried the $25,000 Tesla would remain in development as part of the company's plans for self-driving robo-taxis.

Tesla shares were down by about 3% in trading on Friday afternoon.

The history of the $25,000 Tesla

Tesla's plans for a more affordable model have factored heavily into its plans as a mass-market car company. Scrapping the Model 2 could change investors' view of the company's growth trajectory.

Musk has long touted the importance of an affordable compact crossover, which he recently said would start production at Tesla's Austin Gigafactory near the end of 2025.

On an earnings call with analysts, Musk hedged this timeline, saying his optimism "should be taken with a grain of salt."

A sub-$30,000 Tesla has been teased as part of Tesla's plans since 2020. At the time, Musk said the affordable price point would be achieved by halving battery- and cell-manufacturing costs.

Why Tesla needs an affordable car

There's a particular need for more-affordable electric cars right now, as the average EV shopper becomes more frugal and practical.

Tesla already sells one of the most affordable EVs with its Model 3, which starts at about $38,990. That's well below the average transaction price for any new vehicle in March, which was $44,186, according to JD Power.

Industry data indicates the average price paid for an electric vehicle is even higher, at well over $50,000.

Even with the competitive pricing on the Model 3, Tesla doesn't appear to be keeping up with the next wave of EV adopters.

This week, Tesla reported its lowest quarterly deliveries since 2022 and notched its biggest miss compared with analyst expectations for the quarter.

A recent survey from Boston Consulting Group suggests the next generation of EV shoppers places more importance on vehicle running costs and on buying from well-established brands. Many of these shoppers also gravitate to hybrids, which Tesla does not sell.