Tesla working on cheaper SUV, sources say

Tesla is developing a smaller, cheaper SUV and has contacted suppliers in recent weeks about manufacturing and parts plans, four people familiar with the matter said.

Three of the people said Tesla plans to build the model in Shanghai. One person said Tesla also aims to expand production to the US and Europe.

They said the project is still in an early stage, and production is unlikely to begin this year.

Two people said the SUV would cost less than the entry-level Model 3, which starts at US$34,000 in China and about US$37,000 in the US.

The source said Tesla plans to cut costs with a smaller battery. One person added it would have a single motor.

The effort follows Tesla’s 2024 decision to drop a separate low-cost EV project and focus on robotaxis.

It is unclear whether the new model has been approved for production.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Tesla’s Shanghai factory anchors its reported budget SUV plan

Giga Shanghai is Tesla’s top-producing plant and its main export base, accounting for nearly half of global deliveries, based on Tesla statements cited by Gasgoo, a Chinese automotive news outlet 1.
The site could help roll out a lower-priced model since it sources over 95% of parts locally and turns out about one vehicle every 30 seconds 1.
Tesla says Giga Shanghai can build more than 950,000 vehicles per year 2.
Elon Musk said the factory was running at “max capacity” in September 2024, which raises questions about whether a new SUV would need expansion or a reshuffle of Model 3 and Model Y output 2.

A cheaper SUV could clash with Tesla’s robotaxi push

If it moves ahead, the reported smaller, cheaper SUV would put a mass-market vehicle back on the roadmap alongside robotaxis, as EV demand cools and Chinese rivals gain ground 2.
That direction could strain the robotaxi-first story since Tesla previously moved focus away from a separate low-cost EV effort 2.
If the launch lands well, legacy automakers may need faster cost cuts or risk falling behind in entry-level EVs.