Cheaper Model Y inbound to address Tesla’s falling revenue

Tesla has alluded to the development of a new low-cost EV, which has been described by chief executive officer Elon Musk as “just a Model Y” when responding to questions about the upcoming vehicle’s appearance.

According to a report from Reuters, the new vehicle is set to undercut Tesla’s existing fleet by at least 20 percent, which will keep the US brand competitive with growing competition from China, and hopes to subvert recent financial downturns. 

This is not the first time a new, budget Tesla has made headlines. A secret model known as “E41” was revealed earlier this year in March, and slated to begin production by the end of 2025. It seems likely the E41 is closely connected to the budget ‘Y’, if not the same car.

Tesla Chief Financial Officer Vaibhav Taneja recently confirmed that production of a budget Model Y “started… as planned in the first half of 2025.” – This lines up with previous reports from Reuters, which claimed that Tesla would produce a vehicle in Shanghai using existing production lines by the end of 2025. 

It is critical that Tesla delivers a new product as soon as possible. Chinese EV price wars have put the Model Y on the ropes for global sales, as cheaper domestic brands like BYD come to take its place.

In Australia, BYD’s Sealion 7 Midsize electric SUV recently overtook the Tesla Model 3 to become the country’s second most popular EV behind the Model Y. The Model Y remains in first place for Aussie EV sales with a year-to-date figure of 10,431 units, while the Sealion 7 posts 3756 units and the Model 3 claims 3715 units. 

The Sealion 7 Premium starts at $54,990, while the Model Y rear-wheel drive starts at $58,900. Both prices listed are before on-road costs.

Tesla’s woes are furthered by a reported loss of USD$300 million this quarter as a result of US tariffs. The company went on to say more tariff-induced pain will be coming. Overall, Tesla’s April-June quarterly revenue declined 12 percent – the worst decline for the US Tech company in over a decade, which saw revenue fall to USD$22.5 billion.

We anticipate Tesla’s new car to be built on an existing Tesla platform, but could feature a smaller battery, different battery chemistry, less powerful drivetrain or, could strip premium features like heated/ventilated seats and rear passenger digital HVAC controls to cut costs. 

The ‘Model Y lite’ isn’t the only future product which intends to ride the coat-tails of the Model Y. Tesla recently confirmed that a larger, three-row Model Y (known as the Model Y L) would also begin production at Giga Shanghai, with cars to be on sale in China as early as September of this year.