Goodbye to one of the most exciting choices that everyone thought was on the horizon for purchasers who have been waiting for a truly affordable, appealing electric vehicle to join the market. Reuters reports that Tesla had abandoned plans to produce its long-awaited, less expensive EV.
For years, the brand-new, more affordable Tesla, which enthusiasts had unofficially called the Model 2, had been a mainstay of the automaker’s development pipeline. Elon Musk, the CEO of Tesla, declared back in 2020 that his future EV for the general public would only cost $25,000. This is thousands of dollars less than the majority of EVs that are currently available. A car like that would support Tesla’s aggressive expansion goals and introduce a sizable new market to the world of electric vehicles.
Anyhow, that was the plan. According to Reuters, Tesla plans to employ the next-generation, low-cost platform it is currently building for a robotaxi. Musk, on the other hand, refuted the claim without mentioning any particular errors.
As the market has expanded, new electric car prices have been continuously declining. When the Tesla Model S was introduced more than ten years ago, it was one of the first contemporary EVs and cost about $60,000. The lowest priced vehicle in Tesla’s current portfolio costs $38,990 and can go farther between charges in less time.
However, the adoption of EVs is hampered by expensive prices. Purchase price is cited by automobile buyers as one of the main reasons they continue to buy combustion engines in polls. (The other two main obstacles are worries about the device’s short range and charging location.) Although there aren’t many inexpensive gas-powered cars on the road these days anymore, the issue is more serious in the smaller EV market.
Approximately 19% higher than the average non-luxury mainstream automobile, the average new electric vehicle (EV) sold cost $52,314 in February, according to Cox Automotive. For the month, the industry average was $47,244.
There are electric solutions under $30,000, but they come with significant drawbacks. The charging speeds of the Chevrolet Bolt EV and EUV are poor due to outdated technology. In addition to having an antiquated charging station design and a meager 149 miles of range in its base configuration, the Nissan Leaf also has the same fundamental issue. A few more attractive possibilities become available when one raises their budget to $35,000, but there aren’t many options for consumers on a tight budget who are keen on purchasing a new electric vehicle.
With facilities currently producing EVs commercially on three continents and more EV production experience than any other automaker, Tesla was perhaps best-positioned to provide a sophisticated, affordable EV that consumers would actually want to purchase. Nevertheless, even with Tesla out of the picture, there are still some promising developments ahead.
This year, the Volvo EX30, a small SUV, will go on sale for $35,000. It has a respectable 275-mile range. The $35,000 Chevrolet Equinox electric vehicle will reach a comparable peak. According to Ford, the company is working on a compact electric vehicle (EV) to take on the Model 2 and less expensive Chinese variants. By the end of the decade, it’s generally anticipated that Chinese companies would undercut their established competitors when they join the American market.
Why Did Tesla Make This Move?
First off, according to Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, the EV market is entering a phase of slower growth. Unlike the early adopters who came before them, the next wave of buyers—mainstream consumers with mainstream concerns—isn’t clamoring for electric cars. In the meantime, China’s car sector is quickly becoming a major player in the world, producing competitive EVs at deeply discounted costs.
“Considering that Tesla is already struggling to sell EVs for $35,000 to $40,000, the concept of releasing a more affordable model and pitting it against even more affordable Chinese imports seems absurd. Fiorani stated, “That’s a risky business proposition.”
In five or six years, when average consumers should be more receptive to electrification than they are now, he believes it would be prudent for Tesla to introduce a less expensive car. Tesla plans to begin manufacturing on its next-generation platform by late 2025, according to a statement made by Musk in March.
Consumers who are interested in electric vehicles aren’t just being turned off by cost. The target market for an EV priced under $30,000 is more likely than a higher-income buyer to have significant concerns over range and charging infrastructure, as noted by Ivan Drury, director of insights at Edmunds. According to him, a buyer of a low-cost EV is more
Cost isn’t the only thing keeping EV-curious consumers on the sidelines. As Ivan Drury, director of insights at Edmunds, points out, the target customer for a sub-$30,000 EV is more likely to have serious hang-ups about charging infrastructure and range than a higher-income shopper. A low-cost EV is more likely to be someone’s primary means of transportation, and that buyer may be less likely to have a garage or driveway where they can conveniently plug in, he said. So a cheaper EV wouldn’t automatically have buyers coming out in droves, he said.
“It’s terrible in the sense that there’s something that could have shown up on the market and really revolutionized things,” he said. “But the barriers to entry are so great that I don’t know if it would have really worked.”
Tesla’s Risk
However, Tesla is incurring a large amount of risk in this. One day, the EV market will be enormous in the lower end. According to research firm BloombergNEF, 36% of new automobiles sold in the United States in 2023 cost less than Tesla’s entry-level models. Good sales of the Chevy Bolt EV and EUV in 2023 demonstrate that there is currently a need for affordable EVs.
Not to add, Tesla is now a car firm without any imminent intentions to introduce new models as a result of the reported decision. In the absence of the Model 2, Tesla’s growth prospects are dependent on the models it already offers, a divisive new Cybertruck pickup that caters to a specific market, and a robotaxi that may or may not function.
Self-driving Teslas are something Elon Musk has long promised but hasn’t delivered on. More work has gone into developing self-driving cars than the autonomous vehicle industry had anticipated. And Musk is determined to do it his way, without the sophisticated sensors and comprehensive maps that companies like Alphabet’s robotaxi company Waymo utilize.
Sooner or later, affordable EVs will be seen on American roads. Rivals like China’s BYD will be eager to take over if Tesla does truly withdraw. Until then, Drury offers some guidance that buyers of electric vehicles who are price conscious could find objectionable: Purchase used.