Elon Musk has labeled Tesla's effort to produce the Model 2 as "unnecessary," confirming a shift in focus towards the development of a new robotaxi. This announcement marks a significant change in Tesla's product strategy.
The Model 2 was intended to be Tesla's most affordable electric vehicle, with production slated for the first half of 2025. However, following the recent unveiling of the robotaxi in October, Musk stated that the Model 2 will not enter production as planned.
Musk's original strategy, articulated in 2006, was to manufacture luxury vehicles first to generate profits that would fund a more affordable electric family car priced around €20,000 to €25,000. Increased competition from Chinese electric vehicle manufacturers and slow development of the Model 2 have prompted Tesla to reassess its goals.
Colin Campbell, Tesla's former head of powertrain, revealed in 2023 that the Model 2's electric motor would not utilize rare earth materials, allowing for compatibility with various battery types. This would enhance supply chain flexibility and reduce production costs. It remains unclear if this technology will be integrated into the robotaxi.
The feasibility of Tesla producing a vehicle cheaper than the Model 3 will hinge on battery chemistry choices and cell installation methods. The company has already employed lithium iron phosphate (LFP) cells, which are less expensive to produce than nickel-cobalt-manganese (NCM) cells.
Additionally, Tesla is reportedly developing "cell-to-chassis" technology for its German-made Model Y in collaboration with Chinese manufacturer BYD. This innovation aims to create lighter batteries in smaller dimensions, maximizing space for additional cells and potentially offsetting the lower energy density of LFP, thereby enhancing range.