Tesla is really bad at this

It is important to note that, according to Reuters’ sources, Tesla has not yet greenlit this new EV for production. And while the idea of a smaller, cheaper EV will appeal to many, the person who has to be convinced is CEO Musk, who in recent years has seemed nothing but bored by the idea of running a functioning car company.

At one stage, building an affordable small EV was a core component of Tesla’s planning. The Model 2 was supposed to be built in “very high volume,” Musk said in 2023, but by April of the following year, the Model 2 was dead, despite Musk’s claims that such reports were lies. Instead, Tesla has created a stripped-down two-seater meant for robotaxi use, based on the Model 3.

Since then, Musk has told anyone who will listen that Tesla is no longer a car company but one that specializes in robotics and AI, something that has helped keep the company’s valuation somewhere near the Sun-Earth Lagrange point, despite collapsing sales across the world and a growing excess inventory issue.

The company has something of a cash-flow problem, too: yesterday, Bloomberg reported that Tesla’s free cash flow is expected to drop from $6.2 billion at the end of 2025 to -$5.8 billion, a swing of $12 billion.

Even if Tesla does have the money to develop this new model, its track record suggests the process will be long and laborious. The Model X, Model 3, Model Y, and Cybertruck each faced significant problems in development, both during design and as Tesla tried to establish production lines. And that was when Musk’s attention was fully focused on the company and not on his SpaceX IPO.