Tesla is reportedly planning to introduce a more affordable version of its Model Y, as reported by Bloomberg. The strategy is intended to offset the loss of U.S. federal electric vehicle incentives. Sources suggest that the new entry-level Model Y is likely the same model the company hinted at in its recent social media updates.
The lower-cost version will forgo certain features and incorporate more affordable materials to help offset the expiration of the federal tax credit of up to $7,500, which the U.S. government ended last month. During the company’s most recent earnings call, executives noted that production of the budget Model Y had started in June and then postponed until the U.S. incentives expired. At the time, CFO Vaibhav Taneja and VP of vehicle engineering Lars Moravy shared limited details, with Elon Musk later confirming which model was being referenced.
“The desire to buy the car is very high; it’s just people don’t have enough money in their bank account to buy it. So, the more affordable we can make the car, the better,” Musk said.
Tesla reduced costs on the Model Y in part by focusing on the battery pack and motor. Last week, the company reported a record-breaking 497,099 global vehicle deliveries for the July–September quarter. According to a Reuters report, the lower-priced Model Y is designed to be about 20% cheaper to produce than the refreshed Model Y and could reach an annual production volume of approximately 250,000 units in the U.S. by 2026.
Tesla doesn’t release regional sales figures, but with slower performance in Europe and China this year, the growth likely points to stronger demand in the U.S. Although the end of tax credits boosted sales before the deadline, this surge may lead to weaker EV demand in the near future. In July, Elon Musk warned that the company might experience ‘a few rough quarters’ following the expiration of U.S. incentives.
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