General

Musk: Tesla’s Upcoming Affordable Car Is ‘Just a Model Y’

The remodeled 2025 Tesla Model Y in gray seen from a front quarter angle
  • Tesla CEO Elon Musk says the automaker’s long-rumored cheaper car is “just a Model Y”

After more than a year of speculation, Tesla CEO Elon Musk confirmed last night that a planned cheaper Tesla model is, in fact, Tesla’s current best-selling model. There is no new Tesla on the way.

In a presentation of disappointing second-quarter sales results last night, Musk said the planned low-cost Tesla will be a cheaper version of the Model Y SUV. He did not explain how Tesla will lower its price, but we have a good guess.

It likely uses a smaller battery and will not travel as far between charges. That could still result in a practical car useful for many shoppers.

A Holdover From an Earlier Strategy

  • Tesla once thrived by making cheaper cars every year
  • It changed strategies to focus on automation instead

Tesla built itself into the world’s most valuable car company by market valuation partially on hype, and partially on a careful top-down price strategy.

The company thrived on Musk’s expansive promises. In its early days, he routinely promised self-driving cars the company hasn’t built, a sub-2-second zero-to-60 mph time the company never achieved, range records now regularly exceeded by rivals, and so on. Those promises won publicity and fans.

Meanwhile, the company sold expensive luxury cars first (the Model S and Model X), then used the profits to develop less costly, more mainstream vehicles (the Model 3 and Model Y). The next step on this path was long rumored to be a sub-$25,000 car, the Model 2.

But, in 2024, Musk canceled it.

He set the company on a new path, toward building humanoid robots and an army of driverless taxis, insisting autonomy was its future. He went so far as to tell investors that Tesla was no longer a car company, even though most of its products are cars.

Changing strategies may be the right move. An analysis of sales figures finds that Tesla’s sales peaked in February of 2023 and have never returned to similar numbers.

The release of the Cybertruck showed that Tesla can still generate hype. However, quarterly sales results over the past two and a half years suggest that it may not be able to rebuild its sales.

But some investors still long for the company to return to its top-down car design strategy. At virtually every investor event since, Musk has been asked whether Tesla will produce a cheaper car.

He has long said the company would, but has been coy about how it would get there. That led some to believe the company had a mystery project. One prominent analyst even claimed a secret “Model Q “was in the works.

A Model Y With Fewer Features, Lower Range

  • To make the Model Y cheaper, Tesla will likely cut its range and feature list

At last night’s presentation, Musk was finally clear. “It’s just a Model Y,” he said. “Let’s let the cat out of the bag here.”

“The desire to buy the car is very high. Just people don’t have enough money in their bank account to buy it. Literally, that’s the issue. Not a lack of desire, but a lack of ability. So, the more affordable we can make the car, the better.”

The Model Y currently starts at $46,630, including destination fees. Many buyers benefit from a federal EV tax incentive that cuts that price by $7,500, but it is set to go away in October.

The company has already begun selling Model Y SUVs with lithium iron phosphate (LFP) batteries, which are cheaper to build than traditional lithium-ion batteries. It has a giant new Nevada factory ready to produce many more LFP cells.

So, one way to make the Model Y cheaper would be a smaller, lighter battery. That would give it less range than the current low-range model (good for 327 miles today). But, given that most Americans drive fewer than 40 miles per day, many would still find the car useful with much less range.

Tesla introduced a single-motor version of the Model Y this spring, so it can’t remove power from the car. However, it could introduce cloth seats instead of the faux leather it uses today and remove tech features like the rear seat screen, HEPA filters, and active noise cancellation.