Tesla’s long-awaited low-cost electric vehicle, often dubbed the “Model 2,” was supposed to reinvigorate the company’s global sales, but with production delays piling up, analysts are warning the window for recovery is narrowing fast.
Once promised for a 2025 rollout, the sub-$25,000 car remains stuck in development limbo. Elon Musk has publicly committed to building the car at Tesla’s Texas Gigafactory using next-gen manufacturing processes. But insiders now say those innovations, intended to slash costs, are proving harder to scale than expected.
“Without a new model, things will only get worse,” said Dan Ives, a longtime Tesla bull at Wedbush. “The company’s current lineup is aging, and competitors are flooding the market with cheaper, compelling EV options.”
Demand Slips, Margins Shrink
Tesla’s recent earnings report revealed slowing growth in key markets like China and Europe, where budget-friendly EVs from BYD and VW are gaining traction. In the U.S., price cuts on the Model 3 and Model Y have temporarily boosted sales, but they’ve also eroded profit margins.
The problem, analysts say, isn’t just pricing, it’s product fatigue. “Consumers want something new,” said Jessica Caldwell of Edmunds. “The current portfolio is no longer exciting the market.”
Musk hinted at this in a recent earnings call, admitting that high-volume growth “depends on delivering our next-generation platform.” But a concrete production date remains elusive.
Why the Low-Cost Car Matters
Tesla’s original promise was to accelerate the world’s transition to sustainable energy. A sub-$25,000 EV would help fulfill that mission by opening up Tesla to a broader consumer base. It would also defend against low-cost challengers from China, which have already made inroads into global markets with models priced under $20,000.
Tesla’s only hope for maintaining dominance, according to auto experts, lies in getting that car to market – fast. “The EV wars will be won on affordability,” said Michael Ramsey, an auto analyst at Gartner. “Tesla had a head start. Now it’s being overtaken.”
Internal Headwinds
Internally, sources suggest Tesla is struggling to bring its revolutionary “unboxed” manufacturing approach to life. The system promises to reduce complexity by assembling parts in modules before final integration, but real-world application has been slower than anticipated.
Meanwhile, global economic uncertainty and rising interest rates are dampening consumer appetite for big-ticket purchases like EVs. Without a new, cheaper option, Tesla’s path to growth looks increasingly precarious.
A Risk Tesla Can’t Afford
Despite these concerns, Musk remains publicly optimistic. During a recent investor event, he said the new car would be “mind-blowing,” and claimed it would eventually outsell all other Tesla models combined.
But even some Tesla loyalists are starting to feel the pressure. “The vision is great,” said one investor. “But vision without execution is just hallucination.”
