Tesla has plans to produce a low-cost version of its best-selling Model Y to boost sluggish sales in China, according to a report.
The car will cost at least 20% less to produce than the version launched last year, and will be manufactured on existing production lines, sources with knowledge of the matter told Reuters.
Mass production of the low-cost vehicle – codenamed “E41” – will start at Tesla’s largest factory by output in 2026, according to the report.
Elon Musk’s electric vehicle company has faced slumping sales in China – its second-largest market – as demand slowed and local competition ramped up from rivals like Warren Buffett-backed BYD.
The new, low-cost Model Y will mainly be sold in China, but it will also be produced in Europe and North America, according to the report.
Musk in January said the company would be introducing lower-cost models in the first half of 2025.
Tesla’s Model Y, a fully electric mid-sized SUV crossover, currently starts at $36,351 in China.
It was China’s best-selling car in 2023 and 2024, but has faced more low-cost competition from Chinese rivals, and analysts have warned that Xiaomi’s YU7 crossover – set to launch this year – could further threaten Tesla’s sales.
Xiaomi’s newest model is expected to cost around $34,500, according to CarNewsChina, an English-language news site on the Chinese auto industry.
Xiaomi is the world’s third-largest smartphone maker.
The Chinese tech giant only started selling cars in April, but its SU7 sedan has outsold Tesla’s Model 3 on a monthly basis since December.
Tesla’s market share in China’s electric car market dropped to 10.4% last year from 11.7% the year before.
Meanwhile, Tesla is on shaky ground at home as Musk’s ties to President Trump as the face of his cost-cutting committee have hit the company’s stock.
Shares in Tesla soared last year after Musk started campaigning with Trump, endorsing his run for a second term – even as the carmaker suffered its worst sales year ever.
But the stock is now plunging, alongside other “Magnificent 7” tech stocks, as Trump’s threatened tariffs spook investors.
And Musk’s close ties to the president have also led to a breakout of protests at Tesla showrooms across the country.
Some Tesla cars have been set on fire, and a Colorado dealership has been vandalized with the words “Nazi cars” over Musk’s history of antisemitic social media posts.
Trump recently hosted a showcase of Musk’s vehicles in the driveway of the White House and agreed to purchase a red Tesla Model S at “full price” as he decried the protests.
Tesla has not announced any new products lately, aside from its planned self-driving “Cybercab” for 2026.
Musk has focused on launching different versions of existing models to fend off competition.
The company plans to launch a six-seat variant of its Model Y later this year in China, according to the report.
With Post wires
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