The Affordable American-made EV Was Never Meant to Happen
With the abandonment of his long-promised affordable mass-market EV program, Elon Musk has confirmed Tesla is a niche brand offering expensive EVs to wealthy people and financed by tax dollars.
Who knew the “low-cost family car” was nothing but Vaporware?
It sounded sincere, the idea of Tesla building luxury electric vehicles up front and using the profit dollars to finance the development of EVs that most Americans could afford. That “master plan” in 2006, announced by Tesla CEO and founder Elon Musk, promised to bring to market an EV that could be touted as a “low-cost family car.”
It should be noted that Tesla has been building electric cars for sixteen years, starting with the first battery power-converted Lotus that became available in 2008. Tesla has uniquely evolved into a company that can build EVs at scale, producing nearly 2 million cars in 2023. It was only “a matter of time” before the capabilities of Tesla would produce an EV - the Model 2 - that could be built inexpensively enough to attract a critical mass of customers, Henry Ford style.
The market was promised a Model 2 purchase price of $25,000. That’s $15,380 less than today’s Model 3, Tesla’s least expensive offering. In the meantime, Tesla kept marketing its expensive taxpayer-subsidized EVs, with profits derived largely from selling taxpayer-funded carbon credits to other automakers - $9 billion since 2009 and counting.
But that was okay because the Model 2 was “just around the corner.” Nearly two decades of promises for that “low-cost family car” have now reached an end.
Reuters reports that Tesla is no longer pretending it will use the money it has taken for the last sixteen years to finance development of the $25,000 EV. “Tesla has canceled the long-promised inexpensive car that investors have been counting on to drive its growth in a mass-market automaker,” the news release reported.
Tesla will build luxury-priced models only from now on, which has always been the plan. How do we know this?
Musk knew his EVs were attractive only to a wealthy, niche market, and that average Americans had no intention – or means – to buy such an expensive, limited utility vehicle that did not make practical or financial sense for their lifestyles. By making the promise of a “low-cost family car” that he would never keep, Musk dishonestly took billions of taxpayer dollars to subsidize his cars and pad his profits.
Elon Musk is no Henry Ford
The Elon Musk / Henry Ford comparison was absurd from the beginning. More than 100 years ago, Henry Ford took the auto industry business model of building bespoke vehicles that only the wealthy could afford, simplified the car down to its basic components, and mass produced them on a newly created assembly line. This made it possible for the workers who made Model Ts to be able to afford to buy the cars they made. Ford did not depend on government subsidies or mandates to sell the Model T – he just made a new product that was clearly superior in every way to the product it replaced (the horse and buggy).
Elon Musk was quite brilliant in taking the EV, which the market rejected a century ago, repackaging it as being “zero emissions,” incorporating battery technology from the late 20th century and touting the inherent torque and acceleration of electric motors as somehow being "innovative." The luxury price points of the Tesla contradict the actual build quality and interior appointments as anyone who has driven a Tesla can attest.
And now that EVs have all but been mandated in the coming decade, Musk has a captive market that every other automaker is still trying to figure out. Why bother with the “low-cost family car” he promised for nearly two decades – pretty soon those huddled masses can go buy the Chinese-made BYD Seagull EV for around $10,000.
Anyone insisting that Musk made the decision to abandon the “low-cost family car” because of fierce competition from the Chinese isn’t paying attention to the timing of his announcement. BYD has been around for 27 years, six years longer than Tesla and has been marketing low-cost EVs for fifteen years. Musk knew BYD would be selling low-cost EVs in the US many years ago and figured that he should keep falsely promising those “low-cost family cars” so the carbon tax cash would flow and the subsidies would keep coming in as long as possible, right before the point where the grift became too obvious.
Those $10,000 BYD Seagulls pose very little risk to Tesla in the U.S., as buyers of cheap BYD EVs would never buy a Tesla anyway. No, this was just a way to keep the taxpayer support going and to please investors who keep propping up Tesla stock.
What About the Robotaxi?
There are reports of Tesla going “all in” on an autonomous taxi that has been in the works for years, using the Model 2 platform. That makes good manufacturing and development sense however the “Robotaxi” will be yet another niche product – if it ever gets built and approved for use on city streets.
Self-driving taxis have been the subject of massive investment and testing for nearly ten years, yet we are no closer to Level 5 autonomy than we were five years ago. Part of the reason is the reduction in start-up funding from investors skeptical of getting a return on their investment, and another part is the lack of supporting infrastructure that allows for communication and information sharing.
But the real challenge is consumer acceptance of having no driver in the taxi. A vast majority of people have concerns and trust issues with self-driving cars, with safety and technology malfunction being the top two concerns - 63 percent of all polled recently. And only 29 percent of those polled are willing to pay a premium for a self-driving car, suggesting that between consumer safety concerns and few willing to pay more, market adoption of self-driving cars will be quite slow.
So it really doesn’t matter if the Robotaxi utilizes the Model 2 platform, because the Model 2 is still not going to be built. It will take years for the Robotaxi (or any self-driving taxi) to be accepted by the public. Only a small volume of very expensive Robotaxis will be built until market demand rises, which could take a decade or two.
By then Elon Musk will hope that you will have forgotten the promises of a “low-cost family car,” the billions of taxpayer dollars he lied to obtain, and the absurd notion that putting a 1,000+ pound battery into a car with electric motors that takes nearly an hour to “fast charge” is in some way “innovative.”