Tesla’s affordable SUV could be back on.
Tesla is developing a new low-cost compact electric SUV
Reports from the United States suggest Tesla has begun early pre-production planning for a new lower-cost compact electric SUV, potentially reviving the company’s long-rumoured budget EV programme.
According to Reuters, sources familiar with the matter said Tesla has recently contacted suppliers to discuss plans for the vehicle, which would be an all-new model rather than a variant of the existing Model 3 or Model Y.
The compact SUV is expected to be built first at Tesla’s Shanghai factory in China, with production later expanding to the United States and Europe.
Industry sources said the new model could measure around 4,280mm in length, making it significantly shorter than the Model Y at 4,794mm and placing it in the fast-growing compact SUV segment.
The move would mark a notable shift after chief executive Elon Musk previously downplayed the idea of a US$25,000 mass-market Tesla, saying the company’s future lay in autonomous robotaxis rather than cheaper human-driven vehicles.
However, analysts say slower-than-expected adoption of fully driverless cars and increasing pressure from Chinese rivals may have forced a rethink.
Tesla faces mounting competition from lower-priced electric vehicles produced by brands including BYD, MG and GWM, particularly in China and Europe where value-focused buyers are driving demand.
Sources cited in the report said the new SUV is likely to be priced substantially below the current entry-level Model 3, making it Tesla’s cheapest vehicle if launched.
Cost-saving measures are expected to include a smaller battery pack and rear-wheel-drive layout, which could reduce range compared with the current Model 3 and Model Y.
Despite this, the smaller vehicle is also expected to be lighter, potentially helping efficiency and lowering production costs.
The reported project comes as market analysts predict Tesla could face a third consecutive year of declining sales for its conventional EV range, which still generates the majority of company revenue.
No official launch date has been confirmed, but sources said full production is unlikely to begin this year.