
Tesla developing cheaper, smaller Model Y to rival Chinese EVs
What's the story
Tesla is preparing to launch an affordable variant of its best-selling Model Y in China.
The move comes as part of the company's effort to regain lost ground in the country's EV market.
The new model, codenamed "E41," will be manufactured at Tesla's Shanghai Gigafactory and mass production is tipped to begin in 2026.
Cost reduction
It will cost at least 20% less to produce
The new Model Y will be smaller and at least 20% cheaper to manufacture than the refreshed version that debuted in 2023.
The current car, a mid-sized SUV crossover, retails at around $36,351.
While this aligns with CEO Elon Musk's previous promise of bringing lower-cost models in the first half of 2025, the exact details of the price reduction for the Model Y were not specified by him.
Market strategy
New Model Y primarily for China market
The new Model Y will mainly focus on the Chinese market.
However, it will also be produced for Europe and North America. The timeline for these regions has not been disclosed yet.
Despite being China's best-selling car in 2023 and 2024, Tesla's Model Y is up against stiff competition from domestic brands, which have launched at least six rival models in the past year.
Rising competition
Xiaomi's YU7 crossover could be a strong competitor
Famous for its smartphones, Xiaomi has forayed into the automotive space with its SU7 sedan, which has outdone Tesla's Model 3 on a monthly basis since December.
The company is also launching a YU7 crossover SUV this year, which analysts think could be a serious threat to the Model Y.
With competition heating up in China's EV market, Tesla's plan is quick updates and variations of existing models, not entirely new ones.