Tesla is un-canceling its plan to build a smaller, cheaper EV: report

It looks like a smaller, cheaper Tesla is back on the menu.

Today, Reuters is reporting that the electric automaker is calling around to suppliers about building an all-new — that is, not based on the Model 3 or the Model Y — electric SUV that would be more affordable than its current lineup. The report, which is based on four anonymous sources in the know, said the vehicle would be built first in China, before eventually being brought to the US and European markets.

If true, this would represent a pretty major reversal for Tesla, and especially for Elon Musk, who has insisted over the past few years that the company doesn’t need to make a more affordable EV — he called the endeavor “pointless” — because all cars in the future will be autonomous. In 2024, Musk reportedly cancelled Tesla’s plans to build a $25,000 electric car, thought to be called the Model 2, in order to focus on developing robotaxis and humanoid robots. The decision flew in the face of Musk’s previous promise to build a cheaper model to help accelerate the shift to electric vehicles.

But Musk’s AI-fueled plans has run into more than a few snags. He insisted that by the end of 2025, Tesla would have robotaxis in markets covering 50 percent of the US population — a claim that turned out to be wildly off-base. Tesla’s robotaxis are still only available in one city: Austin. And the vehicles are still supervised by an employee who sits in either the driver or front passenger seat with access to a “kill switch” if anything goes wrong. (There have been some unsupervised tests, but its unclear how many.)

After it quashed the Model 2, Tesla pivoted to releasing stripped down versions of the Model 3 and Model Y. They were designed to be about 20 percent cheaper to produce than their refreshed models, but they also weren’t the affordable vehicles that Musk has been promising for years.

Whether these new models will more accurately fit the bill remains to be seen. Tesla the company could certainly use the sales jolt that could come from a more affordable EV. It is still reeling from the loss of the EV tax credit, as well as Musk’s right-wing politics and support for the Trump administration. Customer deliveries in the first quarter of this year were up over the previous year, but down 14 percent compared to the previous quarter.

Another lingering question is whether the new vehicle deviates from Tesla’s new mission to produce driverless vehicles. According to Reuters’ sources, the company may be trying to have it both ways: a driverless vehicle that could also be driven by humans.

Again, this would represent a major departure from what Musk has been saying over the past few years. The company is currently ramping up production of its steering wheel-less, two-seater Cybercab, which Musk has insisted was the only vehicle worth making for an autonomous future. But the company’s Full Self-Driving technology continues to fall short of full autonomy. Musk has promised an “unsupervised” version of FSD will need at least 10 billion miles before it can be validated for safety. As of the publication of this article, Tesla’s real-time FSD dashboard sits at 9.1 billion miles and counting.