According to reports, Tesla is developing a more affordable version of the Model Y. This project has been codenamed “E41”. This version of the Model Y is expected to be cheaper by at least 20% as compared to the regular model. This new model will be Tesla’s answer to Chinese giants like BYD, and will be primarily targeted at the Chinese market before expanding to Europe and North America. Production for this model is expected to begin in 2026. Tesla wants to regain lost market share in the Chinese market, which has been eaten up by newer products from Chinese brands.
How Will Tesla Cut Costs?
To reduce costs, Tesla is following a “depop” approach, which means simplifying designs to speed up production. This approach will lead to cost-saving methods, similar to the budget Model 3 that was introduced in Mexico. Some features that are expected to be removed are vegan leather seats, second row touchscreens, and ambient lighting. These changes alone could bring down the price by approximately $4000.
Where Will Tesla Produce Them?
Production of the new lower-cost Model Y will begin at Tesla’s gigafactory in Shanghai, with the initial focus on the Chinese market. Reports suggest that once the model gains some traction in the Chinese market, Tesla plans to expand manufacturing to its European and North American plants. This move is in sync with Tesla’s broader strategy to introduce more affordable models by blending aspects of both next-generation and existing platforms.
Tesla’s Recent Performance
Tesla’s sales and market share have been under pressure in the USA. US vehicle registrations have dipped by 11% in January, while Chinese automakers continue to grow rapidly. Tesla hopes that they will regain some lost glory with this cost-effective Model Y. Tesla believes that with this model, they can maintain their global EV leadership, as the competition is growing rapidly with each passing day. The timing of this launch is very critical, considering Tesla’s current affairs and market position.
About 200,000 pre-orders are being reported for the refreshed Model Y in China. This means that the new Model Y could be a potential game changer if it delivers on price while retaining all key features. Customers and Tesla fans are looking forward to this launch as Tesla prepares it for mass production in 2026.
