[From what I understand this is a weapon that the Israeli military doesn't want. It is very expensive to produce. They prefer to buy the M16, or its variant.]
I don't know if the Israeli military wants these weapons or not, but you are absolutely correct on the expense of this Tavor vs. the M-16 and its variants. Because of the strings attached to our financial aid to Israel, the M-16s are basically free. That's because we mandate that Israel use certain quantities of the aid to purchase American goods.
Also, I'm 99% sure that our mil buys the M4 for $900 or less. The M-16 version was cheaper than that a few years ago and probably still is. The Tavor is $1,000, of which the IDF has to cough up 100%.
I don't know- maybe Israel believes that the home grown rifle is worth the difference in costs? Still, if I never shoot a bullpup again, I'll be very happy.
Last time I was in the know a few years back, it was more like $500 and change. In constant dollars, it has gotten much cheaper to produce over the years, and today it is a very fine and thoroughly debugged weapon system that doesn't cost much. It will be very hard to find a compelling replacement. Among the many good reasons the M16 replaced the M14 was that the M14 cost almost three times as much per rifle.