In a surprising turn of events, Tesla has reportedly scrapped its much-anticipated affordable car, a move that has left industry watchers reeling.

According to sources familiar with the matter and company messages seen by Reuters, the electric car giant has decided to cancel the long-promised budget vehicle, which was seen as a cornerstone of its strategy to transition into a mass-market automaker.

Instead, Tesla will double down on its efforts to develop self-driving robotaxis, using the same small-vehicle platform originally intended for the affordable car. This decision marks a significant departure from Tesla’s previous goals, particularly those set by CEO Elon Musk, who has long championed the idea of making electric cars accessible to the masses.

The cancellation of the affordable car, often referred to as the Model 2, comes as a blow to Tesla’s ambitious growth plans. Musk had previously outlined his vision for the company, which included manufacturing luxury models initially to fund the development of a more affordable family car. However, despite repeated promises to investors and consumers, Tesla has now abandoned this goal in favour of pursuing self-driving technology.

The news sent shockwaves through the market, causing Tesla shares to plummet by more than 6% following the Reuters report. Musk, known for his outspokenness on social media, took to his platform X to refute the claims, alleging that Reuters was “lying (again).” Despite the initial backlash, shares rebounded slightly after Musk announced plans for a Tesla Robotaxi unveil on August 8.

The decision to pivot away from the affordable car strategy comes amidst increasing competition in the electric vehicle market, particularly from Chinese automakers offering cars priced as low as $10,000. Tesla’s move to focus on robotaxis presents its own set of challenges, including engineering complexities and regulatory hurdles.

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While some within Tesla have expressed optimism about the shift in strategy, others have raised concerns about the company’s ability to deliver on its ambitious goals. With the cancellation of the Model 2, Tesla’s future sales growth projections and market dominance are now called into question, leaving investors and analysts uncertain about the company’s trajectory.