Robotaxi will stay Tesla's cheapest car as it aims to cut Model 3 and Model Y prices instead of launching Model 2

Tesla has given up on the mass market Model 2 which was supposed to be its most affordable vehicle, starting at about $25,000 after incentives.

Instead of releasing it some time in 2026 as previously rumored, Tesla will only offer the driverless Robotaxi at that time and in that price range.

According to Elon Musk at the Q3 earnings call, a Model 2 would be "pointless" now that Tesla has announced the autonomous Robotaxi, which he initially said will cost under $30,000.

It, however, doesn't become clear if that sub-$30,000 Robotaxi price is before or after incentives. At one point in the earnings call, Elon says that "it'll cost on the order of roughly $25,000, so it is a $25,000 car," presumably after the federal tax credit and other incentives.

Earlier in the call, however, Musk said that the Robotaxi price will be "with incentive sub-30k, which is kind of a key threshold." Needless to say, a $25,000 price point fits into that range, so the two statement aren't mutually exclusive.

Moreover, Tesla already sells a sub-$30,000 car of sorts, as the base Model 3 RWD costs $29,990 after "estimated incentives of $7,500 and 5-year gas savings of $5,000."

Since such incentives will apply to the Robotaxi as well, Tesla would need to price it much lower than the Model 3, and a $25,000 tag would be way more fitting. Given that the Robotaxi will only come with two seats and a smallish 40 kWh battery capable of a 200-mile range, its manufacturing costs will be much lower than those of a Model 3, so a $25,000 price after incentives sounds plausible.

Elon also noted that the Robotaxi/Cybercab manufacturing will be faster than anything else on the market, which will help reduce its costs per unit further:

It's especially not just a revolutionary vehicle design, but a revolution in vehicle manufacturing that is also coming with the Cybercab. The cycle time, like, the, the units per hour of the Cybercab line is - like, this is just really something special. I mean, this is probably a half order of magnitude better than other car manufacturing lines. Like not in the same league is what I'm saying.

This is why, instead of releasing a cheap Model 2, Tesla will try and lower the pricing of its bestselling vehicles like the Model Y and Model 3, while the proverbial $25,000-$30,000 mass market price range in its roster will be occupied by the Robotaxi.

Tesla's engineering head Lars Moravy also chimed in, saying that its "mission has always been to lower the cost of our vehicles to increase the adoption of sustainable energy and transport," and "part of that is lowering the cost for current vehicles."

Tesla plans to make the cheapest EV batteries in the US next year, which could be one way to keep lowering Model 3 and Model Y prices. It is reportedly developing four different 4680 battery designs made with the cost-saving dry cathode method - for the Cybertruck, Model Y, Model 3, and, ultimately, the Robotaxi - that will be the "most competitive" in terms of cost and help keep the price of its vehicles in check.

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