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Tesla plans to launch Model Y ‘cost-effective version’ in China – report

Tesla plans to launch Model Y ‘cost-effective version’ in China – report

  • 17.03.2025 00:00
  • just-auto.com
  • Keywords: dangerous, danger

Tesla is developing a more affordable version of its Model Y, aiming to produce it at least 20% cheaper than the current model. The new variant, part of project E41, will be manufactured in Shanghai and rolled out globally starting in 2026. This move comes as Tesla faces growing competition in China's EV market.

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Analyst rating: Neutral

Tesla's Model Y sales are declining due to competition from domestic brands like Xiaomi and Baidu.

Context

Tesla Model Y Cost-Effective Version in China

Market Position

  • Tesla’s Model Y has been the top-selling car in China in recent years.
  • However, its market share in the battery-only EV sector dropped to 10.4% in 2024 (from 11.7% in the previous year).

Competitive Landscape

  • Domestic competitors like Xiaomi and Baidu are gaining traction:
    • Xiaomi’s SU7 sedan surpassed Tesla’s Model 3 in monthly sales since December 2024.
    • Baidu is enhancing its advanced driving assistance (ADAS) system to compete with Tesla’s offerings.

Production Details

  • A new cost-effective variant of the Model Y, codenamed E41, is being developed:
    • Expected to be at least 20% cheaper to produce than the current Model Y.
    • Planned for mass production in 2026 at Tesla’s largest Shanghai factory.

Market Strategy

  • The scaled-down Model Y will primarily target China but also expand to Europe and North America.
  • Tesla is focusing on variations of existing models (e.g., a six-seat version) to maintain competitiveness in the Chinese market.

Long-Term Implications

  • This move aims to defend Tesla’s market position against increasing competition, particularly from domestic EV manufacturers.
  • The cost-cutting strategy aligns with Elon Musk’s vision to introduce lower-cost models by the first half of 2025.