What's going on with the 2025 Tesla Model 2? Elon Musk denies reports that its upcoming MG4 and BYD Dolphin electric car rival has been cancelled

A report from Reuters explosively claims that inside sources told the publication that the sub-Model 3 planned to cut the entry price for the brand has been cancelled.

The Model 2 was meant to be the realisation of CEO Elon Musk’s original “Master Plan” to build a “low-cost family car” using the profits from the original Model X and Model S as published on Tesla’s website as far back as 2006, but the new claims have the project being cancelled - or at least being put on hold in favour of the much-hyped Robotaxi model launches.

Since the Reuters report, Musk posted on X (formerly known as Twitter) that “Reuters is lying” without specifically refuting claims in the article, then posted mere hours later that the Robotaxi would be revealed in early August.

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Reuters claims that three sources said the affordable car project was on hold, citing a message from a program manager saying “suppliers should halt all further activities related to H422/NV91.” H422 has been the external code name for the Model 2, while NV91 is the internal code name, according to Reuters.

If the claims prove to be true, it would be an explosive revelation for Tesla fans and investors alike, as Musk himself said the Model 2 would begin production in the second half of 2025 in its US home market, and that it would be built in high volumes in the new Berlin gigafactory.

At the brand’s annual shareholder meeting in 2023, slides were shown that appeared to tease the arrival of a Model 2, which it dubbed the “next-generation vehicle”.

The brand has long claimed that its next vehicles will have a much smaller factory footprint, and simpler construction than their predecessors, and will incorporate the more simple high-voltage architecture that debuted on the Cybertruck. It is also set to debut a new “more scalable” drive unit which is said to have a US$1000 “all-in cost”.

The sub-Model 3 planned to cut the entry price for the brand has reportedly been cancelled.

The Model 2 is meant to be the brand’s next big volume push, with a predicted cost of around US$25,000 (AU$38,000) designed to fend off increased competition from Chinese automakers, particularly SAIC Motor’s MG4 hatchback and BYD’s Dolphin hatch, Seal sedan, and Atto 3 small SUV.

The Reuters report caused a further slump in Tesla stock, following on from last week’s dive due to the brand failing to meet the market’s predicted delivery numbers. Tesla delivered 386,810 vehicles to the end of Q1, 2024, a 20 per cent decrease from its Q4 2023 numbers. However, Musk’s subsequent tweet that the Robotaxi would be revealed on August 8 caused a slight rebound.

Tesla’s hold on the EV market in Australia has been in steady decline for the last few years, now making up around 53 per cent of new EVs. It was out-delivered by BYD for the first time in January 2024.

The Reuters report caused a further slump in Tesla stock, following on from last week’s dive due to the brand failing to meet the market’s predicted delivery numbers.

Little is known about the Tesla Robotaxi but it is expected to follow in the footsteps of projects that have come before it, although these have had mixed success.

The Apple Car project, in its original driverless concept, was recently wound down despite it being decades and millions of dollars in the works, while the Cruise self-driving division of General Motors has faced troubles since an accident late last year where a pedestrian was dragged along the road by one of its self-driving vehicles.

Meanwhile Tesla faces other issues in the market, with EV sales experiencing a global slow-down in the wake of a higher-inflation environment, and, according to some reports, Elon’s erratic behaviour affecting the brand’s consideration amongst potential customers who now have several other options to choose from.

Stay tuned as we keep an eye on Tesla’s Model 2 and Robotaxi developments as the year progresses.