Tesla to launch affordable electric vehicle based on Model Y

Tesla is gearing up to introduce a new range of more affordable electric vehicles, starting with a model based on the popular Model Y.

Reports indicate that production for this lower-priced variant is set to take place at Gigafactory Shanghai.

This development follows CEO Elon Musk’s decision to cancel plans for two previously announced budget models, codenamed NV91 and NV92, due to lackluster demand for existing Tesla offerings.

The anticipated price point for this budget model is around $35,000

According to sources, the upcoming Model Y iteration will adhere to a “depopulation” strategy, simplifying its design by removing certain features while retaining core functionality.

Similar to the streamlined Model 3 introduced in Mexico last year, this new vehicle will likely forgo elements such as the second-row screen and ambient lighting, offering a more basic interior while still operating on the established Model 3 and Model Y platform.

The anticipated price point for this budget model is around $35,000, making it approximately $4,000 less expensive than the existing Model 3.

The launch timeline for Tesla’s budget Model Y appears tentative, hinging on the sales performance of the refreshed Model Y. If the new variant underperforms in the market, the release of the lower-cost vehicle could be postponed until the latter half of the year.

However, experts warn that this move could cannibalize sales from the current Model 3 and Model Y, potentially impacting Tesla’s gross margins, which have already tightened considerably over the past two years.

Tesla’s production lines, particularly for the Model 3 and Model Y, have been underutilized, prompting the company to pivot towards a simplified strategy aimed at maximizing output. While the more affordable vehicle could attract a wider customer base, it reflects a critical shift in Tesla’s approach to market demand and production efficiency, from Musk’s previous belief that a lower-priced model was unnecessary.