It has just emerged that Tesla has opted to cancel development of its affordable electric vehicle unofficially known as the Model 2. Citing a group of unnamed sources, Reuters has reported that the automaker is switching its resources to an autonomous robotaxi instead. It will utilize the same platform that was originally planned for the Model 2, while taking full advantage of Tesla's evolving FSD self-driving technologies.

But that's not the end of the story, as these claims have been denied by CEO Elon Musk himself via X, formerly known as Twitter. In a direct response to news of the report, Musk wrote that "Reuters is lying (again)." He didn't, however, provide any specific reasons as to why this report was false.

The Model 2 was supposed to serve as Tesla's mainstream offering for the mass market, with a rumored starting price of around $25,000. The automaker had developed an entirely new platform to underpin this model, and it was said to incorporate new cost-reducing production methods that would both bring down pricing and scale back the amount of space needed to build the vehicle. This high-volume Model 2 would have played a starring role in getting Tesla to its goal of achieving 20 million annual sales by 2030.

Regardless of whether or not the reports about the Model 2's demise are true, here's what some sources told Reuters:

First, a pair of sources told the publication that Tesla's decision to cancel Model 2 development was first announced during a late February meeting involving "scores of employees." One of them said that "Elon’s directive is to go all in on robotaxi." Tesla's autonomous robotaxi project, which Elon Musk has confirmed would be revealed as soon as August 8 of this year, is apparently based on the same platform that was created for the Model 2.

Another source further backed up the claims made about the Model 2's cancellation, saying that its replacement comes in the form of the Tesla robotaxi. They continued by saying that this vehicle will be produced in far lower volumes than the Model 2 would have been.

Next, a fourth source who claims to have insider knowledge on Tesla's developments said that this decision is subject to change. While it agrees with the report that the Model 2 has been dropped in favor of the autonomous robotaxi project, and that Elon Musk sees more of a future for the latter than he does for a cheap EV, that source also said that economic conditions will be the final judge of what will ultimately come to fruition.

Reuters also says it reviewed a number of internal messages made from within Tesla, all of which are related to the Model 2. It cites one message from March 1, which was written by a Model 2 program manager who told engineers to delay their announcements to suppliers "about program cancellation."

Two more messages from the same day were recieved by the publication as well, with one referring to the Model 2 project as 'H422' and 'NV91.' The former is known to be the vehicle's internal codename, while the latter is reportedly its external codename. In full, the message stated that "suppliers should halt all further activities related to H422/NV91."

The final March 1 message cited by Reuters comes from a manager speaking to a group of employees about the project's cancellation, while directing them to document any important findings made during development. "I’d like to thank everyone for all your hard work and dedication to pushing boundaries and executing the best design possible given the aggressive constraints we had to work within," the unnamed manager said. "We would not want all our hard work to go to waste, so it’s important that we tie things off and document things properly."

None of the sources know exactly why the Model 2 was cancelled, except that the autonomous robotaxi will serve as its replacement. In addition, these sources note that an unspecified number of engineers have been reassigned to different projects.

Elon Musk Confirms Robotaxi Is Coming August 8

While Musk adamantly denies the cancellation of the Model 2, he has remained very open about Tesla's autonomous robotaxi, and it has been confirmed that the project will be revealed as early as August 8, 2024.

There are also some indications that the Model 2 may have been paused rather than completely cancelled, hence why the Tesla CEO reacted the way he did to Reuters' report. In a post made on X/Twitter by social media personality and Tesla fan Sawyer Merritt, he wrote that Tesla was "so impressed with how good FSD 12 has performed and were maybe thinking they should be shifting even more resources to the Robotaxi/FSD effort," to which Musk responded with a cryptic side eye emoji.

While that assumption might sound plausible, a second look at the Reuters report essentially knocks it down. As mentioned above, one of the numerous message reviewed by the publication orders that "suppliers should halt all further activities" related to the Model 2 project. But then again, another message tells employees not to let their work "go to waste." Could they be saving it for when Tesla resumes development at a later date?

Regardless of whether the Model 2 is being delayed or completely dropped, Musk has expressed a lot of enthusiasm about Tesla's autonomous developments. The company has recently launched the 12th iteration of its "mind-blowing" FSD (full self-driving) software, and Musk had it installed on every new Tesla vehicle, while offering all owners free samples of the software to boost adoption. The system has, however, been repeatedly hurled with recalls, lawsuits, and concerns from buyers.

Tesla Shares Drop Following Reports

Following the release of the Reuters report, Tesla shares experienced a 3% decline. Investors were said to have been interested in the high-volume low-cost proposition of the Model 2, which means the halt in development has resulted in negative effects in that regard.