Tesla will launch a stripped-down Model Y as its first "affordable" electric vehicle, according to a Chinese media report Thursday, while Reuters had a slightly different take Friday. Tesla stock popped Friday morning after falling Thursday amid general market weakness.
For months, Tesla has said it would launch some "affordable" EVs, with the first starting production by mid-2025. Initially, the rumor mill was that it might be a hatchback variant of the Model 3 or Y. But with no prototype or even images of this upcoming electric vehicle, speculation has grown that the "affordable" EV would be a lower-end variant of the Model Y.
That's what China tech media outlet 36Kr reported Thursday: "Compared with the current Model Y, the new car's battery, power, chassis and other parts have basically not changed much."
Meanwhile, Reuters reported Friday that the low-cost Model Y, codenamed E41 internally, will make an EV that's slightly smaller than the new Model Y, and at 20% less costs.
It's not clear what would be different in this "lower-priced Model Y." Last year, Tesla did release a low-end Model 3 for Mexico. It uses fabric interiors vs. Tesla's typical vegan leather, while removing a second-row screen and ambient lighting strip. It's roughly $4,000 cheaper than a standard Model 3.
Tesla also could get rid of the glass roof in a cheaper Model Y.
'Affordable' EV Lower Margin?
Elon Musk has said that the "affordable" EV in the U.S. will be under $30,000 including tax incentives. That suggests a price tag of slightly under $37,500 before the $7,500 IRA tax credit. At $37,490, that would be $7,500 below the current base-model Model Y Long Range Rear-Wheel Drive at $44,990.
For the "affordable" price to be that low or lower, with a similar battery size, Tesla margins Could likely take a further hit. It also could hurt the brand.
In China, the current base-model RWD Model Y starts at RMB 263,500 ($36,360). An affordable vehicle likely would be significantly less than that. But competition in the sub-RMB 200,000 ($27,630) price range is extremely fierce, with BYD and others making advanced driver-assist systems standard on EVs as low as the sub-$10,000 Seagull.
Tesla China margins on local sales already are fairly low.
Cheap Model Y Timing?
Tesla could release the "affordable" Model Y variant in China in the second half of the year — if demand for the standard Model Y wanes, 36Kr reported. Meanwhile, Reuters reported mass production would begin in 2026 in Shanghai.
It's unclear when the "affordable" vehicle would begin deliveries in the U.S., Europe and other markets.
Deliveries of the refreshed Model Y started in China late last month, followed by the U.S. and Europe in early March.
Wait times for the Model Y are relatively low in the U.S. and China.
Last year, Tesla shelved a much-anticipated $25,000 next-generation EV in favor of an "affordable" model. The next-generation model would have needed a new production line, with the plan to use "revolutionary" unboxed manufacturing techniques. But it appeared that unboxed manufacturing wasn't ready, while it's possible that hoped-for savings in the car itself hadn't yet been achieved.
The affordable model has the advantage of being able to use existing production lines, with Tesla having a lot of extra unused capacity.
Tesla EV Pipeline Bare?
After the upcoming cheaper vehicle is released, the Tesla EV pipeline is rather bare. It says other "affordable" EVs are in the works, but if they are truly new models the lead time could be substantial.
Tesla has unveiled the Cybercab, a two-seat robotaxi with no steering wheel. But that will require unsupervised self-driving. While Musk says unsupervised robotaxis will launch in Austin this June, the unofficial FSD Community Tracker suggests that Full Self-Driving is a long way from living up to its name. Also, the Cybercab may require new production lines and the unboxed manufacturing process.
Tesla Stock
Tesla stock popped 3.9% to 249.98 in Friday stock market trading. Shares fell 3% to 240.68 on Thursday. Many Tesla bulls have hoped for a new form factor, such as a hatchback, to attract a significant new audience.
TSLA stock still fell 4.8% for the week, its eighth straight weekly decline.
Tesla has wiped out all its postelection gains amid growing concerns that Musk's work with the Trump administration and highly political social media posts have caused significant brand "destruction."
More analysts are starting to forecast deliveries will fall in the first quarter vs. a year earlier, with earnings also down.
In an unsigned letter, Tesla told U.S. Trade Rep. Jamieson Greer that the company is "exposed" to other countries' retaliation to Trump tariffs, the Financial Times reported late Thursday.
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