Business09 April, 20262 min read
Tesla Revives Plans for Smaller, Affordable Compact SUV in China
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Tesla developing a smaller, cheaper electric SUV below Model Y. Plans revived after earlier cancellation of the Model 2 project.
Tesla Revives Small EV
Tesla is reviving plans for a smaller, cheaper electric vehicle after canceling the Model 2 in 2024. Four anonymous supplier sources told Reuters the company is developing an all-new compact SUV rather than a repackaged Model 3 or Model Y. The vehicle is about 168 inches long, significantly shorter than the Model 3.
Production is expected to take place initially in China at Tesla's Shanghai factory. The new SUV is expected to be priced significantly lower than the Model 3's starting price of around $34,000 in China. Tesla plans to use a smaller battery and a single electric motor, aiming for a weight of roughly 1.5 metric tons.
Shift from Robotaxis
The revival comes after Musk canceled the Model 2 in 2024 to focus on robotaxis and humanoid robots. Tesla's robotaxis are still only available in one city, Austin, and typically require human monitors. The company has announced plans to start production of a two-door Cybercab robotaxi.
Reuters' sources said the company may be trying to have it both ways: a driverless vehicle that could also be driven by humans. This would represent a major departure from Musk's previous insistence.
Production and Pricing
The new model is expected to be produced at Tesla's Shanghai factory. Tesla aims to price the new SUV significantly lower than the Model 3. The smaller battery will likely result in a shorter driving range.
The vehicle will feature a single electric motor instead of dual motors. Production is unlikely to begin before 2027. Tesla's core business still depends heavily on its existing EV lineup.
Market Context
Tesla's first quarter 2024 report revealed plans to expand the lineup with more affordable models. The company has faced challenges delivering on its promise of affordable EVs. Net income was down 55% in the first months of 2024.
Cost-cutting measures have included headcount reductions. The end of government subsidies in Europe has contributed to a drop in demand. Tesla's market capitalization remains around $1.3 trillion.
