Tesla has finally kicked off “initial production” of its much-anticipated more affordable electric vehicle in June, as announced by the company on Wednesday. This new model, however, is not a completely new design but rather a version of the popular Model Y crossover, according to Tesla CEO Elon Musk.
During the company’s earnings call, Musk revealed that the new model is essentially “just a Model Y,” putting an end to months of speculation about the mystery vehicle. The decision to release a more affordable trim of an existing model comes as Tesla’s car sales have been declining, highlighting the need for a fresh product to attract more customers.
The production of the new model began in June, with Tesla aiming to start mass production in the latter half of 2025, as mentioned in the second-quarter earnings release. Lars Moravy, Tesla’s vice president of engineering, indicated that significant production ramp-up is not expected until the end of the year. He emphasized the company’s focus on maintaining production efficiency for current models amidst the upcoming phase-out of the EV tax credit.
While details about the new model have been kept under wraps for months, Musk’s comments have shed some light on what to expect. Contrary to speculations about a completely new design or the rumored “Model 2,” the more affordable Tesla will be a version of the Model Y with simplified features or cheaper materials. This aligns with earlier reports from Reuters, which mentioned a smaller, cost-effective Model Y variant in development with the internal codename E41.
Musk highlighted the demand for a more affordable Tesla, stating that the primary barrier to purchase is the price rather than customer interest. By offering a cheaper alternative, Tesla aims to make electric vehicles more accessible to a wider audience. Currently, the base Model Y starts at $44,990 before incentives, making it out of reach for many potential buyers.
With sales of its core models on the decline, Tesla’s decision to introduce more affordable options reflects the company’s strategy to boost sales and maintain its market position. The upcoming models are expected to share production lines with the Model Y and Model 3, hinting at a close relationship with these popular vehicles. As Tesla gears up for the release of its new affordable model, customers eagerly await more details and a potential launch in the near future. PST with details on the potential features of the new, more affordable Model Y.
During Tesla’s first-quarter earnings call, CFO Zachary Kirkhorn mentioned that the upcoming models would resemble the current lineup of vehicles. Now, it has been confirmed that the new model in question is indeed a Model Y. This announcement comes after Tesla introduced a cheaper Model 3 sedan with cloth seats in Mexico last year. The company has not revealed exactly what will make this new Model Y variant more cost-effective to produce, but speculations suggest that Tesla may use cheaper materials or a smaller battery to achieve this.
Additionally, Tesla recently released an extended Model Y L with a larger third row in China this year. These moves indicate Tesla’s strategy to diversify its lineup and cater to different market segments.
Why Tesla Needs A More Affordable Model
After experiencing rapid growth for years, Tesla has faced challenges recently due to increased competition and controversies surrounding its CEO. The company’s deliveries have declined significantly this year, prompting the need for a resurgence in sales. Experts believe that introducing new models, especially lower-priced ones, is crucial for Tesla to regain momentum. Comparatively, traditional automakers like General Motors, Toyota, and Volkswagen offer a wide range of vehicles and sell significantly more units annually than Tesla.
Tesla’s current success is heavily reliant on the Model 3 and Model Y, which have reached a saturation point in the market. The Cybertruck, Tesla’s latest model, has not met sales expectations, further highlighting the need for a more diverse product lineup. With the expiration of EV tax credits at the end of September and a slower growth rate in the U.S. electric vehicle market, Tesla must introduce a more affordable model to attract new customers and increase sales.
A lower-priced Model Y, priced around $35,000, could potentially expand Tesla’s customer base and drive sales growth. However, the success of a stripped-down version of an existing model amidst competitive headwinds remains uncertain. The launch of this new model will be a pivotal moment for Tesla as it aims to navigate the changing landscape of the electric vehicle industry.
For further inquiries, contact the author at Tim.levin@insideevs.com.
Updated 3:15 P.M. PST with comments from Tesla’s earnings call.
Updated 3:45 P.M. PST with information confirming the new model as a Model Y.
Updated 4:30 P.M. PST with additional details on the potential features of the new, more affordable Model Y.