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Tesla company (NASDAQ:TSLA) stock is trading lower on Friday after reports that the electric car maker is shedding shares Low cost vehicle plans Amid Chinese competition.
According to a Reuters exclusive report, Tesla has canceled production of its long-awaited affordable car, which strays far from CEO Elon Musk's original mission of creating electric vehicles accessible to a wider audience.
The report adds that this decision dampens hopes of expanding Tesla's market reach and indicates a shift in focus towards developing a self-driving robotaxi on the same vehicle platform.
Interestingly, Musk challenged the credibility of the report in his latest report tweet.
Musk's vision, outlined in his 2006 master plan, involved using profits from luxury models to fund the development of a cost-effective family car.
Despite previous assurances from Musk about launching the budget-friendly model by the second half of 2025, the project's halt comes amid mounting competition from Chinese electric car makers, which are offering cars at much lower prices, some as low as $10,000. Reuters writes.
The change in strategy towards self-driving taxis poses new engineering and regulatory challenges, which could further delay delivery times.
The project, known internally as NV91 and externally as H422, was canceled at a company meeting attended by dozens of employees, with instructions to halt all related activities and document the learning outcomes for future reference, Reuters claims.
The pivot raises doubts about Tesla's ability to meet Musk's ambitious sales goal of 20 million vehicles by 2030 and remain competitive in the electric vehicle market.
In March, Tesla Announced price increases For the Model Y in the US on April 1 and in Europe on March 22. Tesla has offered discounts on Model Ys in China to maintain sales momentum.
After aggressively cutting prices for more than a year, Tesla has seen its gross vehicle margins fall from a peak of 30% in the fourth quarter of 2021 to well below 20% amid the chip shortage crisis.
in First QuarterTesla saw a year-over-year decline in vehicle deliveries for the first time since 2020, delivering 386,810 vehicles compared to 422,875 the previous year.
Production also decreased to 433,371 units from 440,808 units in the same period last year. The company did not meet analysts' expectations.
Tesla said the decrease in volume was due in part to the early stages of ramped-up production for the updated Model 3 at its Fremont factory and disruptions caused by factory closures.
These closures resulted from shipping diversions caused by the conflict in the Red Sea and the arson attack at the Gigafactory Berlin.
Despite these challenges, Tesla has regained its position as the world's largest manufacturer of battery electric vehicles by volume.
Tesla stock has lost more than 36% in the past six months.
Investors can gain exposure to Tesla via… Tidal ETF Trust II The Meet Kevin Pricing Power ETF (NYSE: PP) and VAnguard Consumer Discretion ETF (NYSE: VCR).
Price movement: TSLA shares were trading down 3.42% at $165.26 at last check on Friday.
Disclaimer: This content was produced in part with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
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This article Tesla reportedly canceled plans for low-cost cars, Elon Musk denies story Originally appeared on Benzinga.com
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