Tesla eyes budget compact SUV for global markets

Tesla is working on a new, smaller and more affordable electric SUV, according to four sources familiar with the matter, News.Az reports, citing Reuters. 

In recent weeks, the company has approached suppliers to discuss details of the proposed compact vehicle, including production methods and component specifications.

Sources emphasized that the SUV would be an entirely new model rather than a variant of the existing Tesla Model 3 or Tesla Model Y.

Three of the sources said the vehicle is expected to be manufactured in China, while one noted that production could later expand to the United States and Europe. The SUV is projected to measure about 4.28 meters (14 feet) in length, making it noticeably smaller than the Model Y, which is around 15.7 feet long.

The project comes after CEO Elon Musk canceled a much-anticipated low-cost EV initiative in 2024, shifting focus toward robotaxis and humanoid robots. It remains unclear whether this new SUV signals a renewed emphasis on affordable, mass-market electric cars or aligns more closely with Tesla’s broader push toward fully autonomous vehicles.

According to one source and a Tesla employee familiar with the company’s product strategy, the new model could potentially serve both purposes. While declining to confirm specifics, the employee indicated that Tesla is increasingly aiming to design vehicles capable of operating autonomously while still allowing for human driving when needed.

Although Tesla continues to pursue full autonomy across its lineup, the company recognizes that many markets may not adopt or approve driverless technology for years. Maintaining flexibility to offer vehicles with or without traditional driving controls could help sustain demand and keep production facilities operating efficiently.

As Tesla advances its autonomous ambitions, some analysts anticipate a third consecutive year of declining sales for its conventional EV lineup, which still generates most of its revenue. Currently, the company operates a limited robotaxi service in Austin, Texas, often with human safety monitors onboard.

Tesla did not respond to requests for comment on the reported plans. Sources noted that the project remains in early development, and it is unclear whether the company has formally approved the vehicle for production.

The automaker has previously announced projects that were delayed or never fully realized. For example, concept versions of a Roadster sports car and a Semi truck were unveiled in 2017, but neither has reached full-scale production.

Two sources said Tesla intends to price the new SUV significantly below the Model 3, which starts at about $34,000 in China and roughly $37,000 in the United States. Cost reductions may include a smaller battery—resulting in shorter range compared to the Model Y’s 306–327 miles—as well as a single-motor configuration instead of the dual-motor setups available in current models.

The vehicle is also expected to be lighter, at around 1.5 metric tons versus approximately two tons for the Model Y.

Three sources indicated that production would likely take place at Tesla’s Shanghai facility, though the timeline remains uncertain and manufacturing is not expected to begin this year.

News.Az 

By Nijat Babayev