Recently, Tesla CEO Elon Musk announced through social media X that the company has officially terminated the long-anticipated affordable electric vehicle project Model 2 and will instead concentrate resources on AI and robotics. Musk directly stated in an internal meeting that Model 2 was a product of traditional thinking, and Tesla's future lies in AI and robotics. This statement effectively negates the company's core planning over the past three years. According to insiders, Model 2 was originally planned for release in June 2025 with a starting price of $25,000 and aimed for annual sales of 5 million vehicles, intending to replicate Toyota Corolla's market miracle. However, Musk believes that producing affordable cars "cannot change the world," and instead is redirecting funds toward autonomous taxis (Robotaxis) and humanoid robots (Optimus project).
In fact, as early as during the Battery Day event in 2020, Musk first proposed the concept of developing entry-level electric vehicles with a target price of $25,000 to capture the mainstream consumer market. However, by the end of February 2024, after two years of tug-of-war discussions, Musk convened several senior executives from different departments at Tesla’s headquarters in Palo Alto, California. The fate of Model 2 became the focus of the agenda.
Many senior executives within Tesla believed that Model 2 could achieve millions of units in sales over the next few years, effectively hedging against potential losses from Robotaxis while providing funding support for Musk's artificial intelligence plans. More importantly, Model 2 and Robotaxis could even be developed based on the same platform. Nevertheless, Musk refused. Musk once again proposed reducing the price by cutting some features of Model Y. After this meeting, three executives who advocated continuing the Model 2 project suddenly resigned.
In response to previous rumors about "the cancellation of the Model 2 project," on April 29, 2024, Musk officially confirmed the production plan for Model 2, positioning it as a compact hatchback car, scheduled for production in 2025 at factories in Mexico, Berlin, and Shanghai, with the price maintained around $25,000. According to insiders, compared to the Model 3, the length of Model 2 is expected to be reduced by about 15%, the weight by approximately 30%, and the battery capacity by around 25%. This will allow Model 2 to maintain excellent performance while being more energy-efficient and environmentally friendly.
Now everything has suddenly changed, which may also be a key turning point for Tesla. Musk has become disheartened about the future development of new energy electric vehicles and is no longer very interested. The reason lies in the fact that the electric vehicle market may have entered a new stage, which might make Musk realize the pressure of the situation and also prompt him to make up his mind. In this new stage, Tesla now faces two major problems.
Firstly, China has joined the new energy electric vehicle market, making competition fierce and prices increasingly lower. This situation is similar to the history of oil-powered cars. The high-profit era for new energy electric vehicles has ended, and future development will be like that of oil-powered cars, where low-priced imitation products flood the market, as seen with Korean cars entering the market.
Among these, Chinese electric vehicles are the most obvious new force. With large subsidies provided regardless of cost, China's new energy electric vehicle development speed is very fast. Its growth rate is stronger than the global average growth rate. By 2020, China reversed its position in the world share of new energy passenger vehicles. In 2021, China maintained a strong level of 52.4%; in 2022, China's new energy electric vehicle world share exceeded 63%; in 2023, China accounted for 64% of the world share; in 2024, it continued to sprint to 70.1% of the share; in the first quarter of 2025, China's new energy electric vehicle world share remained at a high level of 67.7%, increasing by 5.4 percentage points year-on-year.
In this situation, the profit margins of new energy electric vehicles are continuously compressed and becoming increasingly lower. Data from the China Automobile Dealers Association shows that in 2024, the total revenue of China's automotive industry reached 10.65 trillion yuan, growing by 4%, but profits decreased by 8% to 462.3 billion yuan, with an industry profit margin of only 4.3%, below the industrial average (6%). Among them, in November 2024, the automotive industry's profit dropped by 35%, with the industry profit margin reaching only 3.3%. Even these figures are still watered-down data after significant policy subsidies. If these subsidies were removed, the situation would undoubtedly be even worse. In August 2024, the overall discount rate of the new car market even reached 17.4%, further highlighting the intensity of market competition.
It is worth emphasizing that the profitability of new energy vehicle companies is generally low. Currently, only a few new energy vehicle enterprises have achieved profitability, including Tesla, BYD, Seres AITO, Li Auto, and Zero Motorcycles. Moreover, the profitability of leading companies like BYD and Tesla has also declined to some extent. BYD's net profit margin remained at 5.02% in the first three quarters of 2024, slightly down from 5.2% in 2023; Tesla's net profit in 2024 was $7.091 billion (approximately RMB 51.65 billion), a 53% decline compared to 2023, with a net profit margin of 7.3%, down nearly 7.7 percentage points from 2023. Most other new energy vehicle companies have yet to achieve sustainable profitability.
Secondly, there is uncertainty regarding the battery technology path for electric vehicles. Whether breakthroughs can be made and which technologies can achieve success remain uncertain. More importantly, Tesla has not prepared adequately in this regard.
Specifically, liquid battery technology is nearing its ceiling, especially the current mainstream lithium iron phosphate batteries (LFP) have approached their theoretical limit (255Wh/kg). Although ternary lithium batteries can exceed 300Wh/kg, they face risks of thermal runaway and cost pressures. Solid-state batteries are widely recognized as the key preferred solution for the next generation of batteries and are included in the development strategies of major regions such as China, the United States, the EU, Japan, and South Korea, becoming a critical battleground for next-generation battery technology competition. Many automakers claim to mass-produce solid-state batteries by 2026 or 2027, such as Geely's 400Wh/kg product. However, from the current reality, this is actually a mirage of solid-state battery industrialization.
Compared to other lithium-ion batteries, solid-state batteries have superior technical indicators. However, these data are essentially greenhouse metrics from the laboratory, with a vast gap between them and industrial mass production. For example, sulfide routes, though possessing high energy density potential (theoretical value up to 500Wh/kg), have toxic characteristics requiring strict production environments (needing inert gas protection) and unit costs as high as 2 yuan/Wh; oxide routes, though safer, have low conductivity and struggle to break through power bottlenecks; polymer routes are mature in process but perform poorly at high temperatures.
Even more severe is the "death spiral" in production processes. Sulfide electrolytes require absolute dust-free environments for production, with single-line construction costs exceeding 1 billion yuan; oxide electrolyte high-temperature sintering process yields less than 60%, resulting in energy consumption three times that of liquid batteries. Even semi-solid-state batteries as a transitional solution cost as much as 1.2 yuan/Wh, twice as much as liquid batteries. For example, the 150kWh semi-solid-state battery pack equipped in NIO ET7 has material costs exceeding 180,000 yuan, accounting for nearly 40% of the vehicle's selling price.
Based on these two points, Musk's decision to abandon the affordable Model 2 can be understood. Tesla originally took a "clever" approach in its technological route, concentrating its technical assets on lithium battery safety packaging and fast charging technology, attempting to achieve breakthroughs in these areas, which are relatively easier compared to solid-state batteries, to gain market advantages. However, this technological route clearly cannot fundamentally solve the problem. Therefore, Musk's disenchantment with the future development prospects of the electric vehicle sector is not surprising. As for Tesla's focus shifting to autonomous driving models, this is feasible in the U.S. market and can receive approval from regulatory authorities. Autonomous driving will enable Tesla to transition into the software field, maintaining a stable monopoly advantage through continuous upgrades, which is certainly a disruptive transformation. However, the investment in autonomous driving is substantial, and its effectiveness remains unclear, so its impact on Tesla's operating performance remains to be observed.
In summary, under the support of significant policy resources, the current global electric vehicle landscape is highly advantageous for China's electric vehicle industry. From a competitive perspective and trend, China's electric vehicles are currently exactly in the "seat" occupied by South Korean cars in the oil-powered vehicle domain. The key in the future still depends on real progress in battery technology. Only when battery technology achieves genuine breakthroughs can China's electric vehicle industry truly achieve a qualitative leap. (Source: Anbang Consulting)
Original article: https://www.toutiao.com/article/7506414805897511435/
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