Tesla has confirmed that its long-rumored affordable electric vehicle is not a brand-new model after all. It’s simply a cheaper version of the Model Y, the company’s best-selling crossover.
During Tesla’s Q2 earnings call, Elon Musk said directly, “It’s just a Model Y.” That clears up the mystery that has surrounded this vehicle for months.
Production began in June, and Tesla expects full-scale production to begin in the second half of 2025. According to Tesla’s VP of engineering, the ramp-up won’t be significant until the end of the year. The company plans to focus on selling existing models before the EV tax credit expires on September 30. The cheaper Model Y should be widely available by the fourth quarter of this year.
For a long time, many believed this affordable car would be Tesla’s rumored $25,000 “Model 2.” Instead, it turns out to be a budget version of the Model Y with simpler features or materials. This lines up with earlier reports that Tesla was planning to build more affordable cars on its existing Model 3 and Model Y lines.
Today, the Model Y starts at $44,990 before the $7,500 tax credit. Musk emphasized the demand is there, but affordability is the problem. He said many people want the car but simply can’t afford it, so lowering the price is key.
Tesla has released stripped-down versions of its vehicles before. Last year, they launched a cheaper Model 3 in Mexico using more basic materials. The new Model Y will likely follow the same strategy, possibly with a smaller battery or reduced features to keep costs down.
Tesla’s need for a cheaper model is clear. Sales have dropped this year, and competition in the EV market has increased. Tesla is still heavily dependent on the Model 3 and Model Y, which may be reaching their sales peak. Newer offerings like the Cybertruck haven’t made a significant dent, with only about 4,300 units sold last quarter.
As EV tax credits phase out and consumer demand cools in the U.S., Tesla needs a hit. A $35,000 version of the Model Y could help attract more buyers. But whether this move is enough to boost growth again remains to be seen.
Will a cheaper Model Y reignite Tesla’s momentum? Or is it too little, too late? That’s the question ahead.
