In response to falling sales and growing market competition, Tesla has confirmed it will begin mass production of a more affordable electric vehicle in the second half of this year.
The announcement, shared in the company's Q2 earnings report, signals a major shift in strategy as Tesla works to maintain its lead in the EV space.
While Tesla did not share a name or price for the new model, spy photos from Chinese social media have revealed a decontented version of the Model Y—possibly the long-rumored low-cost Tesla vehicle, sometimes referred to as "Model 2" in the past.
Tesla CEO Elon Musk confirmed on the company's earnings call that this new lower-cost vehicle is, in fact, a simplified Model Y. He said, "first builds" of the new model began in June, Electrek said.
Recent images posted on platforms like Weibo and Bilibili show a camouflaged Model Y, parked beside the updated Juniper version.
The mystery model appears similar in size but lacks premium features.
According to online footage, the lower-priced version does not include a panoramic glass roof, a rear screen, or the full-width taillight bar. It also appears to have a simplified center console and no Tesla logo on the rear.
Interior shots suggest further cost-saving measures, such as altered seating materials and fewer electronics.
TESLA’S BUDGET-FRIENDLY EV IS IN PRODUCTION
— Mario Nawfal (@MarioNawfal) August 4, 2025
The most affordable Tesla EV is finally taking shape - still behind factory doors!
The Budget Drive:
• First batch built in June - full-scale production ramps later this year
• Q4 North America deliveries kick off Tesla’s… https://t.co/AmXavJhJcn pic.twitter.com/xrQauLzpXX
Tesla Pushes for Affordability as Profits Slide 16%
However, Tesla seems to have kept certain features like the turn signal stalk, which had been removed in other recent refreshes.
According to Yahoo, Tesla's earnings reveal deeper reasons behind the push for affordability. Revenue dropped 12% year-over-year to $22.5 billion in Q2, while net income fell 16%.
Analysts point to Elon Musk's political involvement and weakening demand for higher-priced models as key factors.
Musk recently stepped down from a short-term government role to refocus on Tesla.
Previously, Tesla cut prices on several models to boost demand. Still, a bigger shift was needed.
With average used EV prices in the US now under $32,000, affordability has become essential to compete with rising brands like Shein and Temu in the broader consumer space.
Though Tesla had once promised a brand-new $25,000 model, that idea was reportedly scrapped. Instead, the current plan focuses on stripping down existing models to lower costs.
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