Tesla is working on a new, smaller, and cheaper electric SUV, according to four sources familiar with the plan. The company has recently reached out to suppliers to discuss the SUV’s manufacturing process and specifications. Unlike Tesla’s existing Model 3 or Y, this SUV will be an entirely new vehicle. Three sources indicated that production would take place in China, with plans to eventually expand manufacturing to the United States and Europe. The new SUV will measure 4.28 meters (about 14 feet), making it shorter than the Model Y, which is about 15.7 feet long.
This new initiative follows Tesla CEO Elon Musk’s decision to cancel a low-cost EV project in 2024 and shift focus towards robotaxis and humanoid robots. A key question remains whether this compact SUV represents a return to developing mass-market human-driven electric vehicles or aligns with Tesla’s vision of fully autonomous cars. One source suggested that it could fulfill both roles, as the automaker aims to create models that can operate without drivers while still offering human-driven options.
Tesla acknowledges that the global market may not adopt driverless vehicles for years, making it crucial to preserve options for cars with traditional driving controls. This approach could increase sales and help keep manufacturing facilities operating at high capacity. While pursuing a future with driverless cars, analysts foresee another year of sales decline for traditional EVs, which currently generate most of Tesla’s revenue. The company has only a small number of robotaxis operating in Austin, Texas, typically with human monitors present.
The four sources noted that the project is still in early development, and it is unclear if Tesla has officially approved production. Tesla has previously introduced concepts for vehicles like the Roadster supercar and Semi truck, which were delayed or canceled. Two sources indicated that Tesla aims to price the new SUV significantly lower than its starting Model 3 sedan, which is priced at $34,000 in China and about $37,000 in the U. S. To achieve this lower price, Tesla plans to utilize a smaller battery, which will likely result in a shorter driving range compared to the Model Y’s range of 306 to 327 miles. The vehicle will also feature a single electric motor instead of the dual motors offered on current models and aims to weigh around 1.5 metric tons, compared to about two tons for the Model Y.
Production for the new model is expected to take place at Tesla’s Shanghai factory, although the start date remains uncertain and is unlikely to begin this year. For years, Tesla has stated that its mission includes creating affordable EVs to combat climate change, yet the company has faced challenges in delivering on this promise. Currently, Musk has ambitious goals for vehicle sales, aiming to reach 20 million annual sales by the end of the decade. Plans for a $25,000 EV, often referred to as “Model 2,” had been expected to drive significant growth, but those plans have been scrapped in favor of focusing on driverless options.
Despite earlier commitments to affordable EVs, recent vehicle offerings have been basic versions of existing models with only modest discounts. Prices for these models have not attracted a new customer base, raising concerns among investors about their effectiveness in boosting sales.
Tesla continues to prioritize robotaxis and humanoid robots in public statements, which has played a role in maintaining its high stock market value. The company’s market capitalization stands around $1.3 trillion, significantly higher than its financial fundamentals. Tesla has announced plans to start production of a two-door Cybercab robotaxi, but it is unclear when it will be available for sale or included in their robotaxi fleet, especially since Tesla has not sought the necessary federal exemption for vehicles without traditional controls.
With information from Reuters
