Tesla’s $25,000 EV flip-flop, explained

The idea of a $25,000 Tesla has persisted for years — in part, perhaps, because CEO Elon Musk said he was “very confident” the company could do it at an event in 2020.

But on Wednesday night, during Tesla’s third-quarter earnings call, Musk said the idea of a $25,000 car with a steering wheel and pedals is “pointless,” and “silly.” He said he only wants to sell one car at that price: the “Cybercab” robotaxi he revealed a prototype of two weeks ago.

It was the latest in a long line of public and private flip-flopping from Musk, a process that has so muddied the waters about Tesla’s future product portfolio that some of his company’s most ardent supporters have confidently and wrongly proclaimed that the idea of a drivable $25,000 Tesla — with a steering wheel and pedals — never existed.

But it did. Here’s how we got here.

Battery Day

Musk surfaced the idea of a $25,000 Tesla in 2020 at the company’s so-called “Battery Day” event. It was a showcase of the new in-house battery cells Tesla was working on, which were larger and more energy dense. Those advancements were supposed to help drive down the cost of the most expensive piece of any EV, the battery pack. And they would enable Tesla to sell a car for $25,000, Musk said.

“I think probably three years from now we’re confident we can make a very compelling $25,000 electric vehicle, that’s also fully autonomous,” he said.

You could take that one of two ways. Either he meant the car would be a robotaxi like the Cybercab, with no steering wheel or pedals. Or he was talking about a car with a wheel and pedals that, like he has promised about all other Teslas, would one day receive a software update that made it autonomous. For what it’s worth, Musk reportedly was unsure about whether it would or wouldn’t be manually drivable in a September 2021 meeting.

But it’s not worth spending time arguing what exactly Musk meant. Because his own biographer found out.

Two cars

Musk announced in January 2022 that Tesla was “not currently working on the $25,000 car,” saying at the time that Tesla still planned to do it, but that the company had too much on its plate. He also said that making Tesla’s cars autonomous was more important than designing a car for that price point.

Musk’s biographer, Walter Isaacson, found out what happened next. In his biography, Isaacson describes that Musk and his top lieutenants spent months hashing out whether to pursue the robotaxi idea, or a more traditional car.

Isaacson describes Tesla’s chief designer Franz von Holzhausen trying to convince Musk in an August 2022 meeting that making a car with no steering wheel or pedals was risky if the company couldn’t get its Full Self-Driving software ready in time.

“He suggested that they make a car that had a steering wheel and pedals that could be easily removed,” Isaacson wrote of von Holzhausen’s pitch. Here’s what followed:

But von Holzhausen and Tesla engineering VP Lars Moravy did not drop the idea of a manually drivable car — if only because they saw it as a hedge to the risk that Tesla would either be slow to get the software right, or that it would run into regulatory red tape.

So they kept working on the more traditional design in secret.

In September 2022, according to Isaacson, von Holzhausen and Moravy convinced him that the right approach was to develop both vehicles. Musk was initially not thrilled, as Isaacson tells it. But by February 2023, when von Holzhausen showed Musk models of “the Robotaxi and the $25,000 car next to each other in the studio,” Musk “loved the designs.”

“The new mass-market vehicle, both with a steering wheel and as a Robotaxi, became known as ‘the next generation platform,’” Isaacson wrote.

The report

The idea that Tesla was building two different vehicles on this next-generation platform held for about a year, until Reuters published a bombshell story in April 2024: Tesla had scrapped plans to build a manually okoperable $25,000 car in favor of just pursuing the robotaxi.

It appeared Musk had flipped again. In response, he claimed — without offering proof — that Reuters was “lying.” But a few weeks later when Tesla released its quarterly results, the company tacitly admitted the report was right.

Tesla confirmed in that quarter’s shareholder letter that it was still pursuing a robotaxi design. But it also said it was working on “new vehicles, including more affordable models” that would “utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.” This is a very different plan from the $25,000 car that that Musk approved in February 2023, according to Isaacson.

To this day, the company has not explained what these new models will look like. Some have speculated that Tesla is developing even-more-pared-down versions of the Model 3 and Model Y. What seems clear from subsequent earnings releases is that Tesla is accomplishing those further cost reductions by using ideas from the next-generation platform — ideas that were meant for the $25,000 car that was going to be built on that platform — and building them on existing production lines.

How low is Tesla trying to go with those cost reductions? The company hasn’t said, and it no longer has a public relations department. The Model 3 currently starts at around $42,000. Musk now says a $25,000 car is “silly” and “pointless.” Maybe finally delivering a car at the long-promised $35,000 price tag that the Model 3 was supposed to sell at is a more serious idea.

Whatever the answer winds up being, just remember this the next time anyone questions it: Tesla really was at one point working on a $25,000 car with a steering wheel and pedals.