Tesla is preparing to launch a more affordable version of its Model Y in Shanghai, China. This strategic move comes as the automaker faces intensifying competition in the Chinese market and seeks to defend its market share.
According to industry sources, the new Model Y variant—internally codenamed E41—aims to reduce production costs by at least 20% compared to the current model.
Production will begin in 2026 on existing assembly lines at Tesla’s largest factory.
The new Model Y will be available only in China, but Tesla plans to introduce it in European and North American markets later.
Chinese media outlet 36Kr was the first to report on Tesla’s development of a lower-cost Model Y.
To maintain its competitive edge in China, Tesla continues to develop variations of its existing models. Sources indicate that the company plans to introduce a six-seater version of the Model Y in China within the year.
Tesla CEO Elon Musk has previously announced plans to launch a more affordable model by the first half of 2025.
Although the Model Y has been China’s best-selling car in recent years, domestic manufacturers have launched at least six competing models, intensifying market competition.
Tesla’s market share in China’s battery electric vehicle sector declined to 10.4% in 2024, down from 11.7% in the same period last year.
Additionally, reports indicate that since December 2024, Xiaomi’s SU7 sedan has outpaced Tesla’s Model 3 monthly sales.
In related news, Tesla reportedly signed a collaboration agreement with Baidu last week to enhance the performance of its advanced driver-assistance systems in China.
