Tesla Develops a Low-Cost Model Y for China

Faced with the emergence of increasingly fierce competition in China, Tesla has no choice but to consider a much cheaper Model Y.

Codename: E41. One could add an exclamation mark given how much the management team of Tesla in China seems to insist on its upcoming production launch. Indeed, all kinds of contradictory information are currently coming from China regarding the state of sales of the Sino-American manufacturer. Its first global market is now China, but the trend is dramatically downward.

Proof of this are the actual registration figures by customers, not just orders placed by dealerships in the country. This is where Tesla is attempting to drown the issue, claiming that order books are doing well.

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The leaked information remains: Tesla is in hackers’ sights after X? China is urgently developing a much more affordable “first price” Model Y. This is a common criticism directed at Tesla: its accessibility threshold is too high to meet the needs of a significant portion of the population. The same applies in Europe, where the €25,000 vehicle seems to have disappeared.

Is Tesla lowering its standards to compete with BYD?

It’s a bit the story of the boomerang, the one who, out of arrogance, mocked its rivals just a few months ago. But 2024 marked the beginning of a trend: consumers are no longer rushing to Tesla because competition has grown. It may perform slightly less well, but at a fraction of the price for many customers.

The idea of Tesla China is based on the low-cost concept initiated in 2024 in Mexico, featuring a less powerful, more sparsely equipped Model 3 with fabric seats. An urgent need to cut the price of its Model Y and thus bring it closer to local rivals, including BYD, whose weekly sales are now four times higher than Tesla. In China, the Xiaomi SU7 electric sedan is also more popular than the Model 3. And the upcoming arrival of the Xiaomi YU7 SUV could overshadow the Model Y.

Soon in Europe as well?

According to well-informed sources in China—generally orchestrated leaks to harm Tesla—this Model Y E41 would be about 20% cheaper than the current entry-level Propulsion version. Another detail: this configuration would then be propagated to the Gigafactories in the United States and Europe (Germany). Again, proof that the problem is now global and no longer confined to China.

The launch of production of this E41 version could occur before mid-2025.

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