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Tesla's Affordable EV Denials Sent The Company Into Shock

Elon Musk's affirmation of more affordable Tesla EVs coming soon was a surprise to his team. Plus: how legal are Trump's EV rollbacks?

CM Tesla Model 2

Photo by: InsideEVs

Patrick George

By: Patrick George

Jun 2, 2025 at 10:13am ET

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Some call it the Model 2. Others have called it the Model Q. But inside Tesla, apparently, it's called "Wait, what?"

The long-rumored more-affordable new Tesla has been a point of contention inside the company for years, according to countless reports. While Tesla has spent years promising to expand its lineup into more budget-friendly segments, CEO Elon Musk seems to be convinced that the way to go is to dump the steering wheel entirely—the company's future should hinge on autonomous driving and artificial intelligence, not competing with other car companies.

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But according to a new report, there is—or at least was—a great deal of confusion within Tesla as to whether this potentially $25,000 electric vehicle is happening or not.

That kicks off today's edition of Critical Materials, our morning roundup of industry and technology news. Also on deck today: the legality of President Donald Trump and Congress's crackdown on EVs comes into question, and BYD is facing blowback over its price cuts. Let's dig in.

30%: War Of Words Over Tesla's Maybe-Cancelled $25,000

Tesla More Affordable Compact EV 2

Tesla More Affordable Compact EV, Rendered

Photo by: Theophilus Chin | Motor1

Everybody wants more affordable EVs. Cross the $25,000 barrier, with or without any tax incentives, and you open up zero-emission transportation to a whole new class of buyers—or really anyone fed up with how expensive new cars have become.

If any automaker could pull that off outside of China or Europe, it's Tesla. And Tesla's investors generally want the company to expand its somewhat stale lineup of cars, even as it makes big promises around AI and robots. In fact, Musk's own "Master Plan" from way back in 2006 promised luxury cars first, then low-cost family cars later.

So the automotive world was a bit stunned in April last year when Reuters reported that Musk had cancelled a long-awaited $25,000 EV. Musk responded by doing what he normally does in response to negative press: by saying Reuters is lying. He has since alluded to some new and more affordable models coming soon, but very little evidence of this has arisen.

Today, however, Reuters reports that senior Tesla executives were taken aback when Musk denied the car had been axed—to their knowledge, it was pretty much dead. And if it wasn't, well, other people needed to know about it:

The executives knew that Musk had, in fact, canceled the low-cost vehicle, which many investors called the Model 2, and pivoted Tesla to focus on self-driving robotaxis, the people said. The company had told employees the project was over weeks earlier, Reuters reported, citing three sources and company documents.

Musk’s post was so confusing to some senior managers that they asked him whether he’d changed his mind. Musk rejected their concerns and said the project was still dead, according to the people with knowledge of the matter.

After Musk denied the Reuters report about killing the Model 2, executives questioned Musk about what the company should tell perplexed suppliers and investors, people familiar with the matter said.

That story notes that this concern was not universally shared within the company. Some executives told Reuters that Tesla generally keeps its plans flexible for future products. Others, however, worried that the Securities and Exchange Commission could get involved if Musk "[misled] investors about a future product line that had been baked into their forecasts for the company.

Regardless, it's now mid-2025, a more affordable Tesla is still MIA, and the going theory is that any models that do arise could be stripped-down versions of the Model Y or Model 3 and not something entirely new. We'll see what happens here, but as Tesla's lineup loses steam, rivals are catching up fast.

60%: How Legal Is Trump's EV Rollback?

Los Angeles Traffic 1950s

Trump's policies around EVs, charging and a zero-emission future represent a 180-degree handbrake turn from those of his predecessor, President Joe Biden. It started with the freezing of federal funding for EV charger networks, and as Trump's Big Beautiful Bill works its way through Congress, it could mean an end to EV tax credits and manufacturing incentives—as well as California losing its ability to set tougher emissions rules that a dozen other states follow too.

But as anyone following the news these past few months will know, many of Trump's orders and proposed policies get challenged in court, to varying degrees of success. Automotive News today speculates on what could happen here:

However, Congress used a contested method, the Congressional Review Act, to revoke the California waivers. That mechanism is meant to disapprove agency rules. For example, in 2017, Congress passed a Congressional Review Act joint resolution to disapprove a rule enacted by the Consumer Finance Protection Bureau that would have limited clauses preventing people from suing their banks.

California officials have said the state plans to sue.

If the use of the Congressional Review Act for this purpose stands, it will open up agency notices, orders, declarations, licensing and statutory interpretations to congressional review.

And as for the charging funding:

In February, the highway administration said it would review the implementation of the program, rescind previous guidance and suspend approvals for states. It said no new funds would be issued, but existing obligations would be reimbursed. As of Feb. 6, the department had obligated about $527 million of the remaining $3.3 billion.

The GAO issued a decision May 22 that said “DOT violated the recording statute” because it “treated signed project agreements as the point of obligation” rather than the time that the Infrastructure Investment and Jobs Act made appropriations.

The GAO said the department must release funds appropriated by Congress, which has the power of the purse, according to the Constitution. Or, it must “propose funds for rescission or otherwise propose legislation to make changes to the law for consideration by Congress,” the GAO said.

All of this is to say that things could be more up in the air than we realize.

90%: BYD Criticized For Escalating China's EV Price War

BYD Dolphin Surf (2025) in a short test

Photo by: BYD

As advanced as China's EV sector is, it's got too many brands competing for too few buyers—all of which are embroiled in a brutal price war that's helping sales but is ultimately not great for profits. It also has ramifications for the stability of the entire space.

Bloomberg today reports that BYD, in particular, is getting raked over the coals for its most recent round of price cuts. In fact, the automaker's shares sank 17% amid fears that the government may have to step in:

In a commentary on Sunday, the People’s Daily — the mouthpiece of China’s Communist Party — criticized the “rat-race competition” and warned that price wars can seriously affect supply-chain security. Low-priced and low-quality products would seriously damage the international reputation of “Made-in-China,” it said, without naming any specific companies.

Also over the weekend, China’s automobile industry association warned against “vicious competition” that would hurt profit margins, impair product quality and hinder the healthy development of the industry. The Ministry of Industry and Information Technology agreed with that stance and will step up measures to root out unhealthy competition in in the auto sector and protect market order and consumer rights, media outlet Cailian reported.

BYD was at the fore of the latest round of discounting, slashing prices as much as 34% last last month in a move that was followed by rivals including Zhejiang Leapmotor Technology Co. and Geely Automobile Holdings Ltd. Analysts at Citigroup estimated that after BYD’s discounts, traffic to its dealerships may have surged between 30% to 40% week-on-week.

A price war may juice your sales in the short term, but it can have downstream effects that take years to be seen.

100%: Can An Affordable EV Reverse Tesla's Fortunes?

Tesla Model 3 Cutaway

Photo by: Tesla

A not-inconsequential number of Tesla fans have lost love for the brand thanks to Musk's political activities in recent months. Right now, it's hard to imagine something good enough to help Tesla rebound. But a car that's cheap enough for anyone to buy may make a lot of people forget their issues with DOGE. (Remember, Americans generally have a memory that spans about five minutes at most.)

What do you think?

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Would a $25,000 Tesla help reverse the company's sales fortunes? Let us know your theories in the comments.

Contact the author: patrick.george@insideevs.com

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