Tesla Model 2

Reuters reported that Tesla has canceled its long-promised low-cost car expected to start at about $25,000. Musk called the report a lie.

Tesla's lower-priced model will be a smaller version of the Model Y, and the EV maker is building a capacity plan for it of up to 4 million units a year, a new report said.

Musk linked the launch of the new model to Tesla achieving a deployable full self-driving system, even asking employees, "Do we want to have this car come with a steering wheel and pedals?"

Six months ago Tesla was rumored to be launching a Model 2 in China with a price tag as low as RMB 160,000 ($25,000), though this was denied by the company. Recently such rumors have resurfaced, raising high concerns in China's new energy vehicle industry.

While Tesla executives have denied there were plans to launch a $25,000 'Model 2,' analysts are envisioning the product's arrival.

Reports that Tesla is developing a $25,000 vehicle are circulating widely among Chinese Internet users today. In response, Tesla has dismissed them as fake news.