Tesla’s $US25,000 small car axed to go all-in on autonomous taxi – report

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A new report has claimed plans for the cheapest and smallest Tesla electric vehicle yet have been scrapped to focus on an autonomous version without a steering wheel or pedals.

Tesla CEO Elon Musk has denied the report and accused Reuters, the respected global news agency behind it, of “lying” – but the outlet’s claim is supported by information attributed to three company insiders, and internal documents it says it has seen.

Tesla was known to be developing a “next-generation” platform for small vehicles, which would spawn cars with steering wheels and pedals, as well as one or more fully-autonomous ‘robotaxis’ without driver controls – all smaller than today’s Model 3 and Model Y.

It is the more conventional models – which Elon Musk previously confirmed to enter production in late 2025, and were tipped to be priced from $US25,000 ($AU38,500) – which Reuters claims have been cancelled.

MORE: Official – Tesla small car release date announced (published January 2024)

Reuters claims “Elon’s directive … to go all in on robotaxi” – quoting one of its sources – was issued in late February, and suppliers have been told to “halt” all work on the entry-level car project.

The autonomous ‘robotaxi’ version will continue unaffected, as Tesla commits to its Full Self-Driving technology, without which Musk has previously said the US electric-car specialist would eventually be “worth basically zero”.

Hours after the Reuters report – and shortly after accusing the outlet of “lying (again)” – Musk announced on social media platform X (formerly Twitter) the robotaxi will be unveiled on 8 August 2024.

Musk did not identify any specific inaccuracies or falsehoods in the Reuters report.

According to an internal memo seen by the news agency’s sources, the unnamed manager of the vehicle program said “suppliers should halt all further activities related to H422/NV91,” referring to the external and internal codenames for the project.

Another memo from the project manager, seen by Reuters, reads: “I’d like to thank everyone for all your hard work and dedication to pushing boundaries and executing the best design possible given the aggressive constraints we had to work within.

“We would not want all our hard work to go to waste, so it’s important that we tie things off and document things properly.”

Sources reportedly told Reuters some engineers working on the small car have already been reassigned to other projects, and that meeting relating to the model have been cancelled.

One Tesla insider warned, however, that Tesla’s model plans could change based on economic conditions.

If the report proves to be accurate – and Elon Musk’s accusation is inaccurate – it would be a major U-turn for the company, as well as Musk, who has stated a goal for Tesla to sell more than 20 million cars annually by 2030, or about double Toyota’s annual sales.

However it would not be the first time Musk has called off – or doubted the need for – an affordable Tesla electric car without a steering wheel or pedals.

In his biography of the executive released last year, author Walter Isaacson – who shadowed the Tesla boss for two years – wrote Musk’s desire in 2022 to skip a more conventional version, and develop the small car as an autonomous vehicle only.

But top Tesla executives – including design boss Franz von Holzhausen, and vehicle engineering chief Lars Moravy – convinced Musk to play it safe and offer two versions.

“We want to make sure we are assessing the risk with you. If we go down a path of having no steering wheel, and FSD is not ready, we won’t be able to put them on the road … our proposal is to bake them in right now but remove them when we are allowed to,” von Holzhausen reportedly told Musk in a 2022 meeting.

Musk is said to have shaken his head – and when assured the driver controls could be “small” and removed “pretty easily” – the outspoken Tesla CEO reportedly said: “No. No. NO … No mirrors, no pedals, no steering wheel. This is me taking responsibility for this decision.”

He is quoted as saying in Isaacson’s biography: “Let me be clear. This vehicle must be designed as a clean Robotaxi. We’re going to take that risk. It’s my fault if it f***s up.

“But we are not going to design some sort of amphibian frog that’s a halfway car. We are all in on autonomy.”

It is said Musk was eventually convinced on the $US25,000 car with driver controls, after he was presented with data showing Tesla would need an affordable small car to continue its 50 per cent annual growth, and that it could easily be built on the same production line as the robotaxi.

According to Isaacson, it was a pair of design models – one for the regular small car, and one for the robotaxi – shown by von Holzhausen in February 2023 that got Musk over the line, the CEO allegedly describing the cars as “seeing something from the future.”

Tesla is increasingly threatened by budget-priced electric cars from Chinese brands – including BYD – which are priced as low as $US10,000 ($AU15,000) in China, albeit for a much smaller vehicle with fewer features.

The US electric-car maker forecast the global market for the small electric car to eventually represent 700 million new vehicles annually – compared to 380 million cars for the category in which the Model 3 and Model Y compete.

Key to achieving the price of the small car was to be a new production method claimed to make it half as expensive to build as a Model 3.

Rather than assembling the body of a vehicle first – and fitting the interior and battery further down the production line – sections of the vehicle (front, rear, sides and interior) would be put together as complete assemblies first, before bringing them together at the end of the line to finish the car.

Tesla’s stock price dropped by 6 per cent after the publication of the Reuters report, but recovered to a loss of 3.6 per cent when markets closed on Friday, after Musk accused the publication of “lying” on social media.

The company’s shares increased further – and into positive territory – in after-hours trading after Musk’s confirmation of the robotaxi reveal date.

The post Tesla’s $US25,000 small car axed to go all-in on autonomous taxi – report appeared first on Drive.

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