- Tesla's more affordable EV is coming this year.
- According to unnamed sources, it will be a smaller, cheaper version of the Model Y crossover.
There have been rumors about a more affordable Tesla EV for a few years, but the stars may finally line up. According to three anonymous sources with knowledge on the matter, as quoted by Reuters, Tesla will launch a lower-cost model this year to try and regain lost ground in China—and everywhere else.
The project, codenamed “E41,” will initially be built in Shanghai using existing assembly lines and technologies from current models to keep the costs down. As per two of the unnamed sources, the car will be smaller and cost at least 20% less to manufacture than the refreshed Model Y. This new information counters earlier rumors that Tesla’s cheaper EV would be just a barebones version of the Model Y, not something unique unto itself.
That’s what happened in Mexico last year, when Tesla started selling a cheaper version of the Model 3 with cloth seats, no rear-facing screen, white-only ambient lighting and no heated seats or heated steering wheel. In doing so, the base Model 3 in Mexico costs roughly $4,000 less than the U.S.-bound EV.
Mass production of the shrunken-down Model Y variant will begin next year in China. It will also be manufactured in Europe and North America, but a timeframe was not disclosed. The information that Tesla is developing a new EV to fend off competition in China was first reported by 36kr. According to the Chinese outlet, the new model is described as a “lower Model Y.”
Earlier this year, Tesla said during its fourth-quarter 2024 results that “plans for new vehicles, including more affordable models, remain on track for the start of production in the first half of 2025.” The company added that the new EVs would use parts of its next-generation platform as well as its current platforms and will be produced on the same manufacturing lines as the current passenger vehicle lineup. In other words, the Reuters and 36kr reports go hand in hand with Tesla’s official position.
All this being said, there are still a lot of unanswered questions. We don’t know what the new EV will look like and what powertrain options will be available, but it’s likely that the American automaker will use the same electric motors and battery packs as those found in the current Model 3 and Model Y.
Last year, Tesla saw its first-ever sales decline. Despite the Model Y being a best-seller in many markets, the company’s grip is slipping. In the European Union, Tesla’s registration numbers went down by 13.1% last year. In China’s all-electric car market, Tesla’s market share slipped from 11.7% in 2023 to 10.4% last year. In the United States, it lost 10 percentage points of the EV market share, ending 2024 with 45.4%.
