Tesla is working on a more affordable version of its popular Model Y in Shanghai. The goal is to attract more customers in China and compete better in the growing electric vehicle (EV) market.
This new version, called Project E41, will go into mass production in 2026. It will be smaller and cost at least 20% less to produce than the current Model Y, which starts at 263,500 yuan ($36,351). By offering a lower price, Tesla hopes to appeal to budget-conscious buyers and take on Chinese EV brands.
At first, the cheaper Model Y will be made and sold in China, but Tesla also plans to produce it in Europe and North America later. However, there is no confirmed date for the global launch.
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Tesla has not officially commented on this project, as it is still confidential. The first report about this lower-cost Model Y came from 36Kr, a Chinese news source, but new details about the project name and cost savings are being shared now for the first time.
Tesla CEO Elon Musk mentioned in January that the company plans to launch cheaper models in early 2025, but he did not give details on their price, size, or features.
The Model Y has been the best-selling car in China for two years, but Tesla is now facing tough competition. Many local EV brands have released rival models, including Xiaomi’s YU7 crossover, which is launching later this year.
Tesla’s market share in China’s battery-only EV sector dropped to 10.4% in 2023, down from 11.7% in 2022. Xiaomi’s SU7 sedan has been outselling Tesla’s Model 3 every month since December, even though Xiaomi only started making cars in April.
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To stay ahead, Tesla is focusing on cutting costs and expanding production. The success of this new, cheaper Model Y will be key to maintaining its position in the world’s largest EV market.
