Tesla CEO Elon Musk confirms a more affordable Model Y is on the way later this year, set to play the role of an entry-level volume model.
Years ago Tesla had planned a $25,000 offering at times called a "Model 2," but had effectively abandoned that project amid a focus on the Cybertruck and other projects like the Optimus robot.
A decontented Model Y is now expected to arrive on sale by the end of the year.
Tesla began teasing the idea of a $25,000 car long ago, before inflation rapidly overtook that number, so the EV maker has focused instead on its delayed Cybertruck and other projects like the Robotaxi, as well as the Optimus robot.
But the idea of a stripped-down budget model never quite went away, it turns out, even though we would have expected it to land before 2025.
Now, just such a model is on the way into mass production later this year, and as rumored earlier this spring it'll be just a decontented Model Y.
On a recent earnings call, Tesla CEO Elon Musk confirmed that a more affordable Model Y is indeed on the way.
"It's just a Model Y," Musk said in response to a question about Tesla's future volume model. "Let the cat out of the bag there."
This makes plenty of sense from Tesla's point of view.
How Low Can Tesla Go?
The Model Y has already seen plenty of variants over the six years it has been in production, so there is an extensive catalog of parts that can be added (or subtracted) from the vehicle with ease.
It also makes sense not to develop something new and different, which is what Tesla has tried to do with its entire model range.
There's also the reality that EV buyers don't really want something truly smaller in size, as evidenced by the lack of popularity of hatchback-sized EVs with correspondingly small batteries.
So something close to the Model Y but cheaper seems to be the optimal solution.
Just how much more affordable this Model Y will be remains to be seen. The least expensive Model Y currently offered in the US starts at $46,630, and that's before any tax incentives, which are slated to expire in a matter of weeks.
We think it's pretty clear that the previous $25,000 target price for a budget model is entirely off the table, and that hitting a $35,000 price point will be quite an achievement, if it does not come with a laughably small battery.
Where to Cut Corners?
One of the issues with the updated Juniper Model Y is that the crossover itself was already quite basic, with so much having been trimmed as part of Tesla's drive to reduce complexity.
So one way to decontent is to opt for harder, police-grade interior plastics, manually adjustable seats, fewer interior features, and less trim.
Another tactic Tesla has already used is locking out part of the battery by software.
And long ago General Motors practiced the art of decontenting a car by ditching the rear seat in the Chevette and applying the Scooter badge to it. So a more basic rear bench seat could probably be added, with no third-row option.
The Model Y is already quite skimpy inside, so cost savings could have to be found via the hardware underneath, such as a smaller and less expensive LFP battery offering less range and a less powerful motor.
This tactic has worked well for other EV makers seeking to offer a shorter-range, single-motor model, and it might work for Tesla as well.
But this more affordable Model Y must hit a certain desirability point as well, in order to gain interest from buyers. It cannot be too cheap inside or offer too little range.
It's a tough balancing act for any automaker, especially one already known for cutting corners whenever possible.
Still, we think a $35,000 price before any incentives could be achieved if Tesla were to apply all the cost-cutting measures at its disposal for its popular crossover.
A less expensive volume model—as small and inexpensive challengers like the Volvo EX30 start to arrive—could be just what Tesla needs at the moment.
How should an entry Model Y be priced and what kind of range would it need to interest enough buyers to be a success in the marketplace? Please comment below.
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