Tesla has scrapped plans for a new ‘Model 2’ entry-level electric car, Reuters reports.

The long-promised new model line, which boss Elon Musk recently suggested could enter production late next year, was tipped to come to market at less than £25,000 as a rival to the likes of the Volkswagen ID 2, Renault 5 and MG 4 EV.

Citing three sources familiar with the matter and internal company messages, Reuters says the project has been scrapped and the platform that was to underpin the EV will now be used for a line of autonomous robotaxis, produced at much lower volumes.

Tesla refused to comment when approached by Autocar and Musk responded to the report with a post on his social media platform, X, that read simply: “Reuters is dying”.

Tesla has long hinted at plans for a cut-price new car to sit beneath the Model 3 saloon and Model Y crossover but has only given limited indications of its positioning over the past few years.

Most recently, the firm released a shadowy teaser image of its silhouette, suggesting it would effectively be a downsized take on the Model 3.

The American firm spoke of ambitious plans to sell an astonishing 700 million examples of the car, codenamed Project Redwood, over its lifetime.

Tesla's move away from the cheaper end of the EV market comes at a time when affordable Chinese cars, such as the BYD Dolphin, are arriving in the UK. 

Crucial to the Model 2’s viability was a new production process called Unboxed, which essentially revolves around reducing the amount of work done at each stage of the production line, avoiding any unnecessary movement or disassembly of the car or its components during its journey down the production line.

For example, the seats would be mounted directly to the underfloor battery pack, with the entire unit then raised into a bodyshell that has been painted in sections to avoid the need for door removal and reinstallation.

Initial production for the Model 2 was tipped for Germany. The car's platform was thought to be unrelated to other Teslas.

Reuters suggests this production process and the platform to which it applies will instead be deployed for Tesla's long-mooted autonomous ride-hailing vehicle - which won't be produced in the same colossal volumes.

It quotes a source as saying "Elon's directive is to go all in on Robotaxi".