Exclusive: Tesla executives questioned Musk after he denied killing $25,000 EV project

Reuters

3 days ago

June 2 (Reuters) - Some senior Tesla executives were alarmed last year when Elon Musk denied a Reuters report that the company had killed a planned all-new $25,000 EV that investors had expected to drive explosive vehicle sales growth, according to people familiar with the matter.
'Reuters is lying,' Musk had posted on X, minutes after the story published on April 5, 2024, halting a 6% decline in Tesla's stock. Tesla shares recovered some of the loss after Musk's post, but the stock was down 3.6% at market close.
The executives knew that Musk had, in fact, canceled the low-cost vehicle, which many investors called the Model 2, and pivoted Tesla to focus on self-driving robotaxis, the people said. The company had told employees the project was over weeks earlier, Reuters reported, citing three sources and company documents.
Musk's post was so confusing to some senior managers that they asked him whether he'd changed his mind. Musk rejected their concerns and said the project was still dead, according to the people with knowledge of the matter.
The executives' concerns, which haven't been previously reported, shed light on the company's struggle to deliver a low-cost, mass-market EV, considered a core promise of the company.
Some other Tesla executives were unconcerned about Musk's X post, said people familiar with the matter. The automaker keeps its product plans flexible, one person said, to respond to market conditions.
A year later, struggling with a dated lineup and falling sales around the world, Tesla has still not released the low-cost EV that Musk once called pivotal to the company's future. Neither Musk nor Tesla has explicitly confirmed killing an all-new model that investors and Tesla enthusiasts have long referred to as the Model 2 because it would slot in below the current cheapest model in Tesla's lineup, the $42,500 Model 3.
On Wednesday, Musk announced that he is leaving his role as a special advisor to U.S. President Donald Trump to return his focus to his companies, including Tesla, SpaceX, xAI, Neuralink, and the social media company X.
Tesla and Musk did not respond to requests for comment.
Weeks after Musk's post on X, Tesla published an investor update, opens new tab that assured Tesla still planned 'new vehicles, including more affordable models' that will be built on current manufacturing lines.
Musk and Tesla had said previously that the planned $25,000 EV would be an all-new model, designed and built from scratch on a new platform. Musk had touted the project as a testbed for groundbreaking manufacturing innovations that would lower the cost of electric vehicles.
But instead of an all-new model, Tesla is working on stripped-down versions of the Model 3 sedan and Model Y compact SUV, Reuters reported in April. No pricing on those models has been announced and the cars, set to roll out in the first half of 2025, have been delayed.
On Tesla's earnings call in April, engineering chief Lars Moravy said that the affordable models would 'resemble in form and shape the cars we already make.'
'The key is they'll be affordable,' he added, 'and you'll be able to buy one.'
After Musk denied the Reuters report about killing the Model 2, executives questioned Musk about what the company should tell perplexed suppliers and investors, people familiar with the matter said.
Some executives told associates the denial made no sense -- investors and the public would inevitably learn the truth -- and worried it would hurt Tesla sales as buyers delayed purchases to wait for a $25,000 Tesla that, in reality, it had decided not to build.
Their concerns were not universally shared at the company. One of the sources familiar with the internal deliberations about Musk's public denial told Reuters that Tesla has considered a variety of strategies for producing low-cost EVs over the years.
Gary Black, a Tesla investor who manages money for the Future Fund LLC, said he didn't view Musk's statement as a 'denial' at the time, noting that Musk often makes 'brief and abrupt' comments that 'can be about anything.'
That said, Black told Reuters he recently sold his fund's $1.2 million position in Tesla in part out of concern the affordable new vehicle will be a "stripped down Model Y" rather than a "differentiated product."
Some Tesla executives told associates they were worried that denying the Model 2 was dead could land Musk in hot water with the Securities and Exchange Commission for misleading investors about a future product line that had been baked into their forecasts for the company.
Musk had previously paid a $40 million settlement in 2018 over another social media post that the agency alleged misled investors that Musk planned to take Tesla private.
Reuters could not determine whether executives approached Musk directly with the SEC enforcement concern, nor if they alerted the SEC itself.
An SEC spokesperson declined to comment.
Musk's agreement with the SEC requires him to have his social media posts about certain aspects of Tesla, such as new business lines and forecasts about the company, first vetted by a lawyer.
Musk despises the settlement, according to people familiar with his thinking, and has told associates he doesn't post anything that needs attorney approval.
The same day Musk denied the Reuters report, he lifted Tesla's stock again in after-hours trading with a post saying 'Robotaxi unveil 8/8,' for August 8, a plan he had not widely announced to Tesla employees, said people familiar with the matter. The Hollywood-style debut of a two-door 'Cybercab' ended up being delayed until October and underwhelmed investors.
Many investors long ago gave up hope for a transformational $25,000 EV that would juice sales. Instead, Tesla posted its first annual vehicle sales decline in 2024 and sales were down 13% in the first quarter of 2025 amid rising competition and public protests against Musk's work in the Trump administration.
In April, Chinese automaker BYD outsold Tesla in Europe for the first time and is taking the global lead in affordable EVs. BYD's entry-level Seagull electric hatchback costs less than $10,000 in China and sells competitively for more than double that price in export markets.