For much of the past decade Tesla has toyed with the idea of launching an affordable EV some have labeled the Model 2. But the project has repeatedly been scrubbed, restarted by CEO Elon Musk and then cancelled again. Now, however, as Tesla sales slide and competitors aim to undercut the EV leader with their own low-priced models, the project has again gotten the green light and may finally reach market, sources report. More from Headlight.News.
The U.S. version of the Kia EV3 debuted at the NY Auto Show this month.
Affordability has become a critical issue in the auto industry, especially when it comes to battery-electric vehicles which typically come in at about $5,000 more than comparable gas models.
Manufacturers hope to close the gap — and even make EVs more affordable than products with internal combustion engines. Kia is the latest to move in that direction, launching the little EV3 crossover at the New York International Auto Show last week.
EV giant Tesla has long floated the idea of launching its own entry model, but that project has so far failed to materialize, company insiders saying CEO Elon Musk has given it the go on several occasions, only to then pull the plug. Now, however, Tesla’s affordable EV appears finally to be getting the green light, according to a new report by Reuters.
On-again, off-again
Tesla CEO Elon Musk has repeatedly scrapped plans for a more affordable EV but may see no other option now but to proceed.
Even before it launched the Model 3 in 2017 Tesla floated the idea of a true entry-level product line. That plan was scrapped, with a number of employees involved in the effort let go. CEO Elon Musk has since then approved and then cancelled similar efforts repeatedly, most recently in 2024, as Reuters noted. As part of the billionaire’s latest master plan, Tesla has shifted focus to other ventures, including AI, robotics and battery storage.
But the lack of an affordable alternative at a time when federal EV tax credits have been phased out is taking its toll. Tesla reported its second consecutive annual sales decline in 2025 and 2026 has gotten off to a slow start, EV deliveries of 358,023 coming in as much as 7% below analysts had anticipated. While the numbers were actually up on a year-to-year basis they came in 14% below the total from the fourth quarter of last year.
A variety of factors came into play, including rising competition from domestic competitors in China and the U.S., as well as the hit the overall EV sector took as a result of the tax credit phase-out. But the lack of any options below the $38,630 starting price for the Model 3 standard isn’t helping, several analysts told Headlight.News — not when there are a growing number of low-cost alternatives. That includes the reborn Chevrolet Bolt which starts at $28,995.
Is Tesla serious this time?
The “affordable” Tesla could borrow features and design cues from the Tesla Robotaxi.
Whether Tesla will follow through this time with a product some have dubbed the Model 2 is far from certain; not considering the past moves by the often-mercurial Elon Musk.
But, reports Reuters, “four people familiar with the matter” indicate the effort is moving forward – and appears to be much closer to actually getting an affordable Tesla into production. The carmaker has reached out to suppliers who would be involved in the project, though it wasn’t clear if the automaker has yet given hard orders to begin tooling up.
Significantly, those sources said, Tesla isn’t going to repeat the strategy it recently tried, simply rolling out a stripped-down version of either the Models 3 or Y. What it plans to market will be a ground-up new entry.
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What’s in the works
The new model reportedly will come in around 14 feet in length, at least 1.5 feet shorter than Tesla current best-seller, the Model Y – which today starts at $41,630 including order and delivery fees.
The sources believe Musk may have two reasons for moving ahead with the new EV. By dropping to a lower price segment it could win over buyers reluctant to shell out what Tesla’s current product
Like the Tesla Robotaxi, the “affordable” EV may be produced in a version leaving out the steering wheel and pedals for use in robocab fleets.
s go for. But the new model also may get tooled up to operate as a robotaxi, meaning it might be produced in both retail and commercial versions, the latter even forgoing a steering wheel and other manual driver controls.
The new model would be lighter than the current Models 3 and Y, possibly come in a single-motor configuration and switch to a smaller, more limited-range lithium-iron phosphate battery providing range of less than 300 miles per charge.
Some of Reuters’ sources indicated the entry Tesla EV would initially be built in China, the world’s largest EV market. Though production might later be added in the U.S. and Europe. Production isn’t expected to begin until 2027, at the earliest.
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