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Tesla

Tesla may have no new car coming after all as report reveals plan to launch a stripped down Model Y 

Christiaan Hetzner
By
Christiaan Hetzner
Christiaan Hetzner
Senior Reporter
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Christiaan Hetzner
By
Christiaan Hetzner
Christiaan Hetzner
Senior Reporter
Down Arrow Button Icon
March 14, 2025, 8:53 AM ET
Elon Musk arrives for US President Donald Trump's address to a joint session of Congress
It looks as if Tesla's growth strategy hinges on one future model: the CyberCab robotaxi.Saul Loeb—AFP via Getty Images
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  • The much touted $25,000 entry level Tesla, known colloquially as the Model 2, may not be built, dashing investor hopes. Instead, future sales growth may have to come from a car without steering wheel or pedals—the CyberCab.

The biggest mystery surrounding Tesla’s product roadmap may have been lifted on Thursday, with news trickling out of China that suggests there may be no Model 2 after all.

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First reported by local tech website 36kr and later confirmed by Reuters, Tesla is developing a low-priced version of the Model Y, its best seller with roughly 1.1 million units sold. This suggests that hopes of a coming entry level compact car, possibly a hatchback rather than a sedan, will not come to fruition. 

The car codenamed “E41” will start production next year in Shanghai and will be at least 20% cheaper to produce than the current refreshed Model Y known as “Juniper”, according to Reuters. It could come even earlier if Juniper disappoints, sources told 36kr.

Tesla did not respond to a request by Fortune for comment. 

Since many institutional investors put a premium on tangible sales of EVs over hazier dreams of building humanoid robots, a key growth assumption for many was Tesla entering a new segment, like the compact car, where it could expand its total addressable market. 

These hopes persisted largely because Tesla has been coy about its actual product roadmap ever since last April. “Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025” is the most explicit it has gone in its comments.  

Chief executive Elon Musk kept these embers of hope burning late last year when he promised in October that Tesla EV sales would surge this year. 

“With our lower-cost vehicles, with the advent of autonomy, something like a 20 to 30 percent growth next year is my best guess,” he said. 

This was not repeated in January’s fourth quarter investor call, however. Officially Tesla is only aiming to increase sales. Analysts are now slashing their forecasts to reflect ongoing boycotts and a lack of compelling new product. 

Growth story in doubt

First teased as costing $25,000 back in September 2020, the low-cost car has long been for many investors a bigger strategic priority than the Cybertruck, with estimated annual sales in the millions. 

No carmaker had ever achieved such a feat. If Tesla managed to turn an expensive mid-size electric vehicle into the world’s most popular car, then it was trusted to build a smaller, low-cost model that could breach the 2 million unit ceiling in a single year. 

But the last supposed spy photographs of what some believed to be a Model 2 came in early 2023, prior to a Reuters report last April that revealed plans for a low-cost car built on the next-gen platform it would share with the CyberCab had been scrapped. 

The stock tanked on that news, but Musk was able to restore faith that Tesla’s growth story was intact by saying he had accelerated plans for a new more affordable model by six months to the first half of this year. 

‘Having a regular 25k model is pointless’

Yet he never got more specific. During the same October call when Musk predicted growth of up to 30% in 2025, he then made a comment whose significance may have been underappreciated at the time. 

“Having a regular 25k model is pointless, it would be silly, like it would be completely at odds with what we believe,” he said.

At the time that was interpreted to mean Musk simply would not launch a new product that was so cheap as to not come equipped with its Full Self Driving hardware, an AI inference computer known as AI4 (previously HW4). 

Now it seems increasingly clear the explosive growth Tesla forecasts will come from only one model: the CyberCab. The silver lining is Musk estimates its sales could amount to 2 million a year, or even 4 million. 

But that is little consolation for investors because of one key concern: the CyberCab has no steering wheel or pedals. It requires a full legal and regulatory framework in place in order to be sold and operated on public roads. 

Nor can Tesla simply convert the CyberCab into a car for sale by adding human controls, because the market for two-door cars seating a maximum of three people is minuscule. The vehicle as it is conceived and designed is likley only financially viable as a vehicle for robotaxi fleets.

About the Author
Christiaan Hetzner
By Christiaan HetznerSenior Reporter
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Christiaan Hetzner is a former writer for Fortune, where he covered Europe’s changing business landscape.

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