Tesla plans new affordable compact EV amid slowing demand
What's the story
Tesla is said to be working on a new, compact electric SUV, according to Reuters. The vehicle would be an entirely new model and not a variant of the existing Model 3 or Y. Tesla has reportedly reached out to suppliers in recent weeks to discuss manufacturing processes and specifications for this upcoming vehicle.
Manufacturing details
New SUV to be shorter than Model Y
The new compact SUV, measuring 4.28 meters long, would be shorter than Tesla's best-selling Model Y SUV. It would be manufactured in China, with plans to expand production to the US and Europe. The move comes after CEO Elon Musk scrapped a low-cost EV project in 2024 to focus on robotaxis and humanoid robots.
Strategic pivot
Smaller SUV could signal return to mass-market human-driven EVs
The development of a smaller SUV could indicate a return to mass-market human-driven EVs. However, it is also possible that the new model fits into Tesla's plans for fully autonomous vehicles. The company has previously shown concept vehicles for a Roadster supercar and Semi freight truck but hasn't produced the sports car or mass-produced the Semi yet.
Cost-cutting measures
Tesla aims to price new vehicle significantly lower
Tesla plans to price the new vehicle significantly lower than its entry-level Model 3 sedan, which starts at $34,000 in China and around $37,000 in the US. The company intends to cut costs by using a smaller battery and offering a single electric motor instead of two. The new model would also be lighter at about 1.5 metric tons compared with the Model Y's two tons.
Market strategy
Tesla's inconsistent efforts toward mass-market EVs
Despite Musk's early promises of affordable, mass-market electric vehicles, Tesla's efforts have been inconsistent. The company had planned a $25,000 EV known as "Model 2," but those plans were scrapped in 2024. Instead of focusing on traditional cars, Tesla has shifted its focus to robotaxis as a way to reduce costs per mile for riders and car owners charging them for trips.