Tesla Intends to Introduce a Smaller Model Y That is 20% Less Expensive to Manufacture | Carscoops

      Insider sources indicate that the new electric vehicle will closely resemble a smaller version of the Model Y, with mass production anticipated to commence in 2026.

      Domestic competitors, such as BYD, are gradually diminishing Tesla's market share, prompting the need for a new cost-effective model.

      The upcoming electric vehicle is expected to be manufactured in China, Europe, and the USA.

      Recently, Tesla had nearly total control over the rapidly expanding EV market in China. However, with local players like BYD gaining traction globally, the American automaker is now competing against increasingly strong rivals that are consistently reducing its market share. In response, Tesla is said to be developing a more affordable variant of the current Model Y.

      In the previous year, Tesla achieved a record by selling over 657,000 vehicles in China. Nonetheless, sales have plateaued early in 2025, and introducing a lower-priced model could be essential for the company to regain its momentum. Reports suggest that this new version will draw from the “Juniper” variant of the Model Y, although certain details are still unclear.

      Chinese outlet 36KR indicates that this new EV is being created through a “depop” method, which is a streamlined process designed to quickly launch new models with minimal modifications. Additionally, Reuters cites three anonymous sources familiar with the project, as it remains confidential, stating that the vehicle is under the project codename “E41” and is being developed on existing production lines, expecting to start mass production in 2026.

      Base Model Y or Smaller Model Y?

      Reports from China suggest that the base Model Y will be a more basic version akin to the budget Model 3 Tesla introduced in Mexico last year—it will forego features like vegan leather in favor of cloth seats, eliminate the second-row touchscreen, and forgo ambient lighting, all for an approximate $4,000 reduction in price.

      However, sources from Reuters indicate that the new EV based on the Model Y will actually be smaller and have a production cost that is at least 20% lower than the upgraded version of the crossover, which starts at 263,500 yuan (around $36,500 at current exchange rates) in China.

      This cost-effective, scaled-down Model Y may be one of the “more affordable” models Tesla announced it was developing in January, suggesting that these new vehicles will incorporate features from both its next-generation and current platforms.

      Manufactured In China, Europe, and The US

      According to the same insider sources, this less expensive, smaller Model Y-based EV will primarily target the Chinese market to support Tesla’s efforts to maintain its market share. Nevertheless, the vehicle will also be manufactured for Europe and North America, although there is currently no definitive timeline for its arrival in those markets.

      Despite the competition, the 2025 Model Y seems to be performing well in China. Local reports indicate that Tesla has already secured over 200,000 pre-orders for the electric SUV, with deliveries having commenced.