Tesla CEO Elon Musk earlier this year promised to bring to market a more affordable EV and, with federal tax credits having ended last week this may be the perfect time to roll it out. The automaker’s account on X teased what could be a new, lower-cost version of the Model Y expected to debut on Tuesday. Headlight.News has more.
A second Tesla teaser on X showed a fast-spinning wheel which, a few observers countered, could be the long-awaited Tesla Roadster.
With federal tax credits lapsing on September 30, EV sales are expected to take a sharp dip during the coming months – with many analysts warning that it will be critical to start bringing more affordable offerings to market if automakers hope to revive momentum.
Tesla appears ready to do just that, the Texas-based manufacturer using CEO Elon Musk’s social media site X to tease the launch of what appears to be a new, lower-cost model on Tuesday.
Musk has long-promised to bring out an affordable product line, something that has been widely referred to as the “Model 2,” though that’s never been an officially confirmed designation. And while such a product line may still be in the works, Tesla is, for the moment, expected to take a shortcut to affordability by going with a stripped-down version of the Model Y.
What’s coming
Tesla recently launched the first update of Model Y since its introduction.
Tesla has several projects in the works, including the long-awaited remake of its original Roadster. There’s some speculation that could be what’s actually coming on Tuesday, which could explain one of two teasers on X showing a sporty black chrome wheel with the Tesla logo on it spinning rapidly.
But most observers expect the Tuesday announcement to focus on a low-cost addition to the line-up.
Over the last several years Musk has waffled on how to approach that sort of addition to the line-up. Work on a unique Model 2 has reportedly started and stopped several times. And while insiders suggest it’s still in development, Musk delivered a pretty clear message when asked what would come this year during a second-quarter earnings call.
“It’s the Model Y,” he said, adding that, “The desire to buy the car is very high; it’s just that people don’t have enough money in their bank accounts to afford it. So, the more affordable we can make the car, the better.”
Cutting corners
It’s unclear what the status is of an even lower-cost Tesla widely described as the “Model 2.”
Last March it was widely reported that Tesla would launch a cheaper version of the Model Y crossover in China where the automaker has faced increasing price pressure from fast-growing domestic competitors like Geely and BYD. But established automakers like Nissan, Chevrolet, Kia and Volkswagen are also starting to undercut the EV giant in the U.S. and other markets with a wave of new products starting, in some cases, under $30,000.
Starting with a fresh new platform has its advantages but by going with an update of the Model Y, Tesla sharply reduces up front development costs, said Sam Fiorani, lead analyst with AutoForecast Solutions.
What Tesla is expected to deliver will forego some of the features currently found in the Model Y. Speculation centers on a lower-range LFP battery pack – though it should still deliver an EPA-rated 250 miles per charge – less fancy seats and no sunroof, among other features to go. Tesla is expected to retain access to the Autopilot and Full Self-Driving software because those can generate significant ongoing subscription revenues.
As was expected with the modified Model Y for China, pricing should come in about 15% lower than the current base Long-Range Rear-Wheel Drive model which goes for $46,630 after factoring in delivery fees. That would effectively offset the effectively higher price of the Model Y after losing federal tax credits.
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Propping up the EV market
The 2026 Nissan Leaf gets a complete makeover – and a starting price just under $30,000.
Tesla’s not the only automaker taking steps to keep price-sensitive buyers in the EV market. Hyundai, for one, last week announced it will offer the equivalent of the lost federal tax credits on 2025 versions of the Ioniq 5, while discounting the 2026 model by up to $9,800, depending upon trim. General Motors and Ford have also announced big post-credits deals.
Even with such incentives, however, EV sales are expected to drop sharply during the fourth quarter. Demand hit an all-time, equal to 11% of all new vehicle sales, in September, pulling ahead business from later this year as customers raced to collect those federal givebacks.
Without that cash, many buyers are likely to stick with internal combustion technology, analysts have warned, AutoPacific forecasting the EV market share through 2030 will climb no higher than 12%. It originally expect to see demand peak above 20%.
But not everyone is as pessimistic. There are plenty of other low-cost models coming, including the third-generation Nissan Leaf, the revived Chevrolet Bolt, the Kia EV3 and EV4, and Ford’s “Universal EV” line, said J.D. Power data chief Tyson Jominy. That could provide the lure to help the market bounce back and yet approach 20% by the start of the next decade,
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