- Elon Musk denied a Reuters report that Tesla is scrapping plans for a $25,000 car.
- The inexpensive model has been an important part of Tesla's plans for several years.
- Tesla shares were down about 3% Friday morning.
Tesla CEO Elon Musk denied a report that the electric vehicle company is scrapping plans for a long-awaited $25,000 model,
Reuters reported Friday that Tesla is throwing in the towel on its long-planned, more affordable model, citing sources familiar with the matter and company messages.
"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 cites 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 codenames 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."
According to the report, the small-vehicle platform that would have carried the purported $25,000 Tesla would remain in development as part of the company's plans for self-driving robotaxis.
Tesla shares were down about 3% in trading Friday afternoon.
The history of the $25,000 Tesla
Tesla's plans for a more affordable model have factored heavily into Tesla's future 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 most recently said would start production at Tesla's Austin Gigafactory near the end of 2025.
Musk hedged this timeline at the time on an earnings call with analysts, warning his optimism "should be taken with a grain of salt."
A sub-$30,000 Tesla has been teased as part of Tesla's future 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 is 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.
The average price paid for an electric vehicle is even higher, which is well over $50,000, according to industry data.
Even with the competitive pricing on the Model 3, Tesla doesn't appear to be keeping up with the next wave of EV adopters.
Tesla reported its lowest quarterly deliveries since 2022 earlier in April, and notched its biggest-ever miss compared to analyst expectations for the quarter.
A recent study from Boston Consulting Group found the next generation of EV shoppers places more importance on vehicle running costs and buying from more well-established brands. Many of these shoppers also gravitate to hybrids, which Tesla does not sell.