Tesla Insiders Reportedly Worried Musk’s $25K EV Denial Could Violate SEC Agreement

To date, Tesla has not confirmed that the Model 2 has been canceled, although it has since redirected its focus to stripped-down versions of the Model 3 and Y.

CEO Elon Musk’s post on X last year, denying that Tesla (TSLA) had canceled its long-hyped affordable electric vehicle, was reportedly misleading and triggered concern among senior executives that Musk was putting the company at legal risk.

On April 5, 2024, Musk posted “Reuters is lying” on X, minutes after the news agency reported Tesla had scrapped the entry-level model. The post helped halt a 6% drop in Tesla’s stock, which closed the day down 3.6%. 

According to a Reuters report, when Musk publicly denied canceling the long-anticipated launch of Tesla’s $25,000 electric vehicle (EV), despite the company having already shelved the project, it raised internal alarms about potential investor deception and exposure to scrutiny from the Securities and Exchange Commission (SEC).

Executives were reportedly surprised because they had already been told weeks earlier that the vehicle, known informally as the Model 2, was off the table. Instead, Tesla was pivoting toward building a robotaxi.

According to the report, the managers were not informed about Musk’s declaration on X and were left wondering whether the CEO had reversed his decision. When a few approached Musk for clarity on what they should tell suppliers and investors, they were reportedly rebuffed.

The report also highlighted that some executives voiced concerns that denying the car’s cancellation could raise legal concerns under Musk’s 2018 SEC settlement, which requires that posts about material business decisions be pre-approved by a Tesla lawyer. 

It’s unclear if those concerns were escalated to regulators, the report said.

To date, Tesla has not confirmed that the Model 2 has been canceled, although it has since redirected its focus to stripped-down versions of the Model 3 and Y. 

The company says those affordable models, now delayed until 2025, will be built on existing production lines.

Tesla’s vehicle sales declined for the first time in 2024, and sales were down 13% in the first quarter (Q1) of 2025. The company also lost ground to its Chinese rival, BYD (BYDDY), in Europe, whose sub-$10,000 Seagull EV is gaining market share in export markets. 

Tesla’s stock was down 1.75% in pre-market trade on Monday amid broader market weakness. The Consumer Discretionary Select Sector SPDR Fund (XLY), which includes retail, auto, apparel, and other consumer-focused stocks, edged 0.56% lower.

Tesla’s shares have fallen more than 11% this year but gained 94% over the past 12 months.

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