The notion of a $25,000 Tesla has floated around for years-around perhaps because the company's CEO, Elon Musk, stated in 2020 that he was "very confident" the company could do it.

But on Wednesday night, on Tesla's third-quarter earnings call, Musk said the idea of a $25,000 car with a steering wheel and pedals is "pointless," and "silly." He said he only wants to sell one car at that price: the "Cybercab" robotaxi he revealed a prototype of two weeks ago.

It was the latest in a long line of public and private flip-flopping from Musk, a process that has so muddied the waters about Tesla's future product portfolio that some of his company's most ardent supporters have confidently and wrongly proclaimed that the idea of a drivable $25,000 Tesla-with a steering wheel and pedals-never existed.

But it did. Here's how we got here.

Battery Day
Elon Musk floated the prospect of a $25,000 Tesla back in 2020 at the company's so-called "Battery Day" presentation. The product was a showcase for new in-house battery cells that were both larger and more energy dense than the prior generation. Those advances would lower the price of the most expensive component of any EV: the battery pack. And they would enable Tesla to sell a car for $25,000, Musk said.

"I think probably three years from now we're confident we can make a very compelling $25,000 electric vehicle, that's also fully autonomous," he said.

You could take that one of two ways. Either he meant the car would be a robotaxi like the Cybercab, with no steering wheel or pedals. Or he was talking about a car with a wheel and pedals that, like he has promised about all other Teslas, would one day receive a software update to turn it into an autonomous vehicle. For what it's worth, Musk reportedly was undecided about whether it would or wouldn't be manually drivable in a September 2021 meeting.

But nothing is worth losing time arguing what Musk exactly meant. Because his own biographer found out.

Two cars
During January 2022, Musk announced that Tesla was "not currently working on the $25,000 car," saying at the time that Tesla still planned to do it but felt that it had too much on its plate. He also said that making Tesla's cars autonomous was important instead of designing a car for that price point.

Musk's biographer, Walter Isaacson, spoke to people who found out what happened next. In his biography, Isaacson describes how Musk and his top lieutenants spent months hashing out whether to pursue the robotaxi idea, or a more traditional car.

According to Isaacson, Tesla's chief designer Franz von Holzhausen pitched an idea to Musk in an August 2022 meeting, trying to convince him that making a car without a steering wheel and pedals was too risky given the fact that the company would not be able to make its Full Self-Driving software ready on time.
"He suggested that they make a car that had a steering wheel and pedals that could be easily removed," Isaacson wrote of von Holzhausen's pitch.

No, Musk said. No. NO. A long pause ensued. "No mirrors, no pedals, no steering wheel. This is me taking responsibility for this decision."

The executives around the table shifted uncomfortably in their seats. "Uh, we will get back to you on that," one said.

Musk fell into one of his very cold moods. "Let me be clear," he said slowly. "This vehicle must be designed as a clean Robotaxi. We're going to take that risk. It's my fault if it f—s up. But we are not going to design some sort of amphibian frog that's a halfway car. We are all in on autonomy.".

But von Holzhausen and Tesla engineering VP Lars Moravy weren't giving up on the notion of a manual-driving car, even if only as an insurance policy in the risks that Tesla may either take too long to get the software right or is going to hit some critical regulatory hurdle.

So they secretly kept working on the more conventional design.

In September 2022, according to Isaacson, von Holzhausen and Moravy convinced Musk that the right thing to do was to build both of them. Musk wasn't exactly over the moon about it, according to Isaacson's telling. But by February 2023, when von Holzhausen presented Musk with models of "the Robotaxi and the $25,000 car side by side in the studio," Musk "loved the designs."

"The new mass-market vehicle, both with a steering wheel and as a Robotaxi, became known as 'the next generation platform,'" Isaacson wrote.

The report
The notion that Tesla was building two different vehicles on this next-generation platform held for about a year, until Reuters broke a bombshell story in April 2024: Tesla had walked back plans to build a manually operable $25,000 car and was instead singularly focused on the robotaxi.

It seemed Musk had changed his tune. In response, he stated — without offering any supporting proof — that Reuters was "lying." However, when Tesla posted its financial report for the quarter, the company effectively admitted the report to be true.

Tesla admitted in the shareholder letter for that quarter that it was indeed "continuing our work on a design for a robotaxi.". But it also stated it was developing "new vehicles, including more affordable models" that would "use some of the next generation platform assets and some of our current platform assets, and will be able to be built on the same manufacturing lines as our current vehicle line-up." That's a far cry from the $25,000 car Musk greenlit in February 2023, according to Isaacson.

The company has, so far, failed to tell the world what these new models shall look like. Some have speculated that Tesla is building still more stripped-down versions of the Model 3 and Model Y. What's clear from the subsequent releases of earnings is that Tesla is achieving those further cost reductions by taking ideas from the next-generation platform -- ideas originally intended for the $25,000 car that was to be built on that new architecture -- and putting them on existing production lines.

How low is Tesla prepared to go with those cost cuts? The company won't say, and it doesn't have a public relations department any longer. The Model 3 begins around $42,000. Musk now says a $25,000 car is "ridiculous" and "meant for nothing." Perhaps, once and for all delivering a car at the long-promised $35,000 price tag the Model 3 was meant to sell at is a more grown-up idea.

Whatever the answer may be, just remember this the next time anyone asks the question: Tesla really was at one point working on a $25,000 car with a steering wheel and pedals.