Exclusive: Tesla executives questioned Musk after he denied killing $25,000 EV project, sources say
June 2 (Reuters) – Some senior Tesla executives were reportedly alarmed last year when Elon Musk publicly denied a Reuters report stating that the company had canceled plans for an all-new $25,000 electric vehicle (EV)—a model that many investors had anticipated would fuel major sales growth, according to sources familiar with the matter.
Shortly after Reuters published its April 5, 2024, story, Musk responded on X (formerly Twitter), writing: “Reuters is lying.” The post helped stem a 6% drop in Tesla’s stock; shares partially rebounded but still closed down 3.6% that day.
Internally, executives knew the affordable EV—often referred to as the “Model 2”—had been scrapped weeks earlier, as the company shifted focus toward developing autonomous robotaxis, the sources said. Employees had already been informed the project was over, Reuters reported, citing three sources and internal company documents.
Musk’s public denial created confusion among some senior managers, who questioned whether he had reversed the decision. However, Musk reportedly reaffirmed that the project remained canceled, dismissing their concerns.
These previously unreported executive misgivings highlight the internal tension over Tesla’s inability to deliver on a long-promised goal: a mass-market, low-cost electric car.
While some executives expressed deep concern over Musk’s statement, others were less troubled, citing Tesla’s long-standing flexibility in product planning. One insider said the company routinely adapts to shifting market conditions.
A year later, Tesla still has not introduced a new low-cost EV, even as its aging lineup and declining global sales have raised alarms. Neither Musk nor Tesla has directly confirmed canceling the model investors dubbed the “Model 2,” which was expected to be priced well below Tesla’s current entry-level Model 3 at $42,500.
On Wednesday, Musk announced he would step down from his role as a special advisor to former U.S. President Donald Trump to focus on his companies: Tesla, SpaceX, Neuralink, xAI, and the social platform X.
Tesla and Musk declined to comment for this story.
In the weeks following Musk’s denial, Tesla issued an investor update stating it still planned to release “new vehicles, including more affordable models,” to be built on existing production lines. However, earlier statements from Musk and Tesla had described the $25,000 EV as a completely new vehicle, built from the ground up on a fresh platform and incorporating revolutionary manufacturing techniques to slash costs.
Instead, Tesla has pivoted to developing simplified versions of the existing Model 3 sedan and Model Y SUV. According to an April report by Reuters, those models—slated for release in the first half of 2025—have been delayed, and pricing has not yet been disclosed.
During Tesla’s April earnings call, engineering chief Lars Moravy said the upcoming affordable models would “resemble in form and shape the cars we already make,” adding: “The key is they’ll be affordable—and you’ll be able to buy one.”
Following Musk’s denial of the Model 2's cancellation, several executives raised concerns about what to communicate to investors and suppliers. Some told associates that Musk’s post was misleading and feared it would damage Tesla’s credibility, especially if consumers held off on buying current models in anticipation of a nonexistent $25,000 car.
The concerns were not unanimous. One source close to internal deliberations noted that Tesla has long weighed various strategies to bring a budget EV to market.
Gary Black, a Tesla investor and managing partner at Future Fund LLC, said he didn’t interpret Musk’s post as a definitive denial. “He often makes brief and abrupt comments that can be about anything,” Black said. Still, he confirmed his firm recently exited a $1.2 million Tesla position, citing doubts that Tesla’s affordable EV would be a “differentiated product” and concerns it would simply be a stripped-down Model Y.
SEC Scrutiny Concerns
Some Tesla executives feared that Musk’s denial could draw scrutiny from the U.S. Securities and Exchange Commission (SEC) for potentially misleading investors on a key product forecast. In 2018, Musk paid $40 million in an SEC settlement over a social media post that falsely suggested he was taking Tesla private.
It remains unclear whether any executives directly confronted Musk about possible SEC risks or notified the agency themselves. The SEC declined to comment.
Under the terms of the 2018 agreement, Musk must have certain Tesla-related social media posts—those involving new business lines or financial forecasts—pre-approved by a company lawyer. According to sources, Musk resents the restriction and has told associates he doesn’t seek legal review for his posts.
On the same day he denied the Reuters report, Musk also boosted Tesla stock during after-hours trading with another post: “Robotaxi unveil 8/8.” According to insiders, this announcement had not been widely shared within the company. The planned event—a Hollywood-style debut of a two-door "Cybercab"—was ultimately delayed until October and received a muted reaction from investors.
Investor enthusiasm for a $25,000 Tesla has faded. In 2024, Tesla reported its first annual vehicle sales decline, and sales were down 13% in Q1 of 2025 amid intensifying competition and public backlash against Musk’s political affiliations.
In April, Chinese automaker BYD overtook Tesla in European sales for the first time and has emerged as a global leader in affordable EVs. BYD’s Seagull electric hatchback retails for under $10,000 in China and remains competitively priced in international markets.
Reporting by Rachael Levy. Additional reporting by Chris Prentice. Editing by Brian Thevenot and Michael Learmonth.
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