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If not, it has a big problem — because that’s still how it makes money.
We may never get a super affordable Tesla.
The electric-car maker has canceled its longstanding plan to build a $25,000 vehicle, usually called the Model 2, Reuters reported on Friday, killing a product that was — until today — thought to be central to the company’s growth.
Heatmap was unable to independently confirm Reuters’ reporting. Tesla does not have a traditional communications office, and an email to a generic press address went unanswered. Tesla’s stock was down more than 3% when markets closed.
But the cancellation, if true, is an earthquake. For years, Tesla has told investors that its path to becoming a mass-market auto brand ran through building ever-cheaper cars. At the center of that story was Tesla’s forthcoming $25,000 car, an accessible vehicle that would allow electric vehicles to compete with the cheapest gas-powered new cars on price.
But with the $25,000 car canceled, Tesla’s future as a car company is now a question mark.
Tesla has denied the reporting. In a post on the social network X, Elon Musk said: “Reuters is lying (again).” He later added: “Reuters is dying.”
Musk is not nearly as trustworthy as a normal CEO might be: He has a long history of posting evasions and untruths. The Reuters story cites internal emails and memos from Tesla substantiating the cancellation. According to the report, Tesla’s managers told employees and outside suppliers to stop all work on the project in early March. The company is still planning to build a self-driving “robotaxi,” the story said, an electric car with no steering wheel that will work entirely on the carmaker’s Full Self Driving technology and which was supposed to be built on the same platform as the Model 2. Several hours after the story’s release, Musk claimed on X that the robotaxi would debut on August 8.
But with the robotaxi lies Tesla’s first big problem. The Full Self Driving software is plagued with problems and is generally not thought to be safe for full-time operation; after a recall last year, Tesla now counsels owners that the driving software should be “supervised.” Earlier this year, The Washington Post reported that a Tesla recruiter was using the Full Self Driving feature when his car ran off the road and struck a tree, killing him, in Colorado in 2022.
Teslas, in other words, are not fully self-driving, and it’s not clear that with their current autonomous technology — which relies entirely on cameras and computer vision — they ever will be. (Alphabet’s successfully self-driving Waymos, which are already on the road in California and Arizona, use a more expensive setup that requires Lidar sensors and GPS maps.) Those technological shortcomings raise fairly obvious questions about how viable a robotaxi without a steering wheel might actually be.
For years, observers could talk themselves into ignoring those problems because the mass-market Model 2 was on its way. Tesla seemed to have struck some kind of internal bargain whereby it would try to build a hyper-affordable electric car (the project that seemed to motivate many non-Musk employees) on the same chassis and platform that it would use for the robotaxi (the project that clearly motivates Musk). With the cheap car canceled, however, only the problematic robotaxi remains. One way to read the canceled Model 2, in other words, is that Musk has taken total control over the company’s strategic planning and no longer cares to hedge any of his bets.
That’s a critical problem for Tesla, because Musk holds lots of jobs. He is the CEO and product architect at Tesla; the CEO and chief engineer at SpaceX; the owner, CTO, and executive chairman at X; and the founder or cofounder of the Boring Company, xAI, and Neuralink. At best, Musk has been distracted. The mainstays of Tesla’s line-up — the Model 3, Model Y, and Model X — have gone years without a major update. The Cybertruck went on sale last year, but Tesla has struggled to scale up its production; Musk has gone so far as to say that “we dug our own grave” with the Cybertruck. On top of that, the stainless steel behemoth isn’t exactly new: It debuted in 2019, just a few months after Tesla announced the Model Y crossover.
That aging line-up has started to hit Tesla’s financials. From January to March, it sold only 386,810 vehicles, many fewer than analysts expected and 9% below what it sold during the same period a year earlier. It also produced 47,000 more cars than it sold, suggesting that it is beginning to hit the limits of consumer demand for its current menu of cars. Now, it has seemingly canceled the cheapest product in its pipeline, suggesting that it will need to survive for several more years with no new toys to speak of.
“For four to five years, they haven’t worked on anything that they plan to put out. For a car company, you don’t see that,” Corey Cantor, an EV analyst at the market research firm BNEF, told me.
That failure will reverberate around the world. For now, it means that the entry-level electric vehicle market remains securely in the hands of Chinese companies. The vertically integrated automaker BYD has grabbed headlines and terrified Detroit with its $9,000 electric Seagull hatchback, but it is only one of many potential firms vying in the space. The Chinese smartphone maker Xiaomi says that it has received more than 100,000 orders for its $29,000 SU7 sedan, which debuted last week. The Chinese automakers Nio, Geely, and Great Wall have their own electric models. Without a sub-$30,000 Tesla, these electric models will compete — for now — primarily with gas-burning sedans like the Toyota Camry or Honda Civic.
In the American car market, where almost no Chinese brands operate, the consequences will be different. According to BNEF’s analysis, a big share of the new car market will be won by whatever company can sell an EV for $30,000 to $37,000, Cantor told me. “There’s basically 36% of the market that [Tesla] is unable to reach today,” because it doesn’t sell a Model 3 for much less than $38,000, Cantor said. (Going below $30,000 unlocks only a final 13% of the market, he said.)
Hyundai and Kia, which when taken together make up the country’s No. 2 best-selling EV brand, will be able to grab even more market share from Tesla. (Why treat them as one entity? Hyundai owns 40% of Kia, and the companies collaborate closely on vehicle design and engineering.) Hyundai already sells the market’s cheapest electric SUV, the Kona Electric, which starts at $34,050. Tesla’s Model Y crossover, by comparison, is $37,490 after a federal tax credit is applied. When Kia opens a factory in Georgia later this year, it should qualify for more tax credits, potentially letting it sell a car approaching the $30,000 mark.
Tesla may still be planning to drive down the cost of its Model 3 sedan, which today starts at $38,990. But the fact that Hyundai and Kia exist, frankly, somewhat blunts what Tesla’s failure means for decarbonization. Although it would of course be good for more companies to sell uber-accessible EVs, the marketplace should have options even if Tesla stumbles.
So perhaps the biggest question is what lies ahead for Tesla as a company. With a market cap of half a trillion dollars, even after multiple substantial sell-offs, Tesla remains the world’s most valuable car company; it is priced like a tech company, with its shares selling for 38 times its earnings. (Ford’s stock, by comparison, is a mere 12 times the size of its earnings.)
Adam Jonas, an analyst at Morgan Stanley, has argued that Tesla will evolve away from being a car company; its energy storage and charging businesses seem to be going decently. For his sake, Musk has described the company as between “two waves” of growth, with the next big swell coming next year as new cars go on sale.
But far more concerning, Cantor said, is the possibility that Tesla finds itself stranded between two business strategies. Tesla no longer has the prestige of a luxury brand like Mercedes or BMW, and its purportedly high-end Model S can’t match the specs of a Lucid Air or Porsche Taycan sedan. If it can’t compete with a low-margin, more volume-oriented carmaker like Toyota, Volkswagen, or BYD, either, it might soon be stuck in the middle of the EV market, defending an eye-watering share price with no new arrows in its quiver. Anyone in that position might be expected to have some range anxiety.
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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”