- The lower-cost Model Y -- internally codenamed "E41" -- will be mass-produced at Tesla's Shanghai factory starting in 2026, according to Reuters.
- The Shanghai-built model will be sold primarily in China to defend market share, Reuters said.
Tesla (NASDAQ: TSLA) will produce a lower-cost version of the Model Y crossover in Shanghai, Reuters said in a report today, citing three people familiar with the matter.
The lower-cost Model Y, internally codenamed "E41," will be produced using existing production lines, according to the report.
Tesla will begin mass production of the car in 2026 at its Shanghai factory, the company's largest in terms of capacity, said two of the people.
The car will be smaller than the refreshed Model Y and cost at least 20 percent less to produce, two people said.
One person familiar with the matter said the Shanghai-built model would be sold primarily in China to defend market share, according to Reuters.
The model will also be produced in Europe and North America, the person said, without providing a specific timeframe, the report said.
Tesla launched the revamped five-seat Model Y in China on January 10, with deliveries beginning on February 26.
There are two variants of the facelifted Model Y, including a rear-wheel-drive version with a starting price of RMB 263,500 ($36,380) and a long-range all-wheel-drive version with a starting price of RMB 303,500.
Yesterday, local media outlet 36kr reported that Tesla's China team led the development of a "lower-priced Model Y" in response to fierce competition in the market.
Compared with the current Model Y, the new model has not changed much in the battery, power and chassis, 36kr said, citing people familiar with the matter.
Tesla China is developing this new model by way of depop, a development idea within Tesla that is to achieve a rapid product launch by simplifying the configuration while keeping the main features the same, according to 36kr.
Instead of using the English name, the project code for this new vehicle will use letters plus numbers, the report noted.
The timing of the launch of this new model will depend on the performance of orders for the updated Model Y, 36kr said, adding that Tesla is expected to launch this "lower-priced Model Y" later this year if sales of the updated Model Y don't perform as well as expected.
Tesla launched a lower-priced version of the Model 3 in Mexico in August 2024. The cheaper Model Y is led by its Chinese team, while the lower-priced Model 3 is led by Tesla US headquarters, according to the report.
The Model Y remains one of the best-selling models in China, but Tesla's share in the country has been trending downward over the past few years.
In February, Tesla sold 26,777 retail units in China in February, down 11.2 percent from 30,141 in the same month last year, according to the China Passenger Car Association (CPCA).
The US EV maker ranked No. 7 in China's new energy vehicle (NEV) market -- which includes plug-in hybrid electric vehicle (PHEV) models -- with a 3.8 percent share in February, down from a 4.5 percent share in January, and down from 7.8 percent a year earlier.
In the battery electric vehicle (BEV) market, Tesla had a 6.3 percent share in February, according to data compiled by CnEVPost.
For comparison, Tesla's share of the BEV market in China in February 2021, February 2022, February 2023, and February 2024 was 22.61 percent, 11.26 percent, 11.50 percent, and 13.64 percent, respectively.
($1 = RMB 7.2422)
Tesla China has planned 'lower-priced Model Y' as defensive move, report says
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