Tesla Plans to Reduce Model Y Prices by 20%

Tesla reportedly plans to manufacture a lower-cost variant of its top-selling Model Y in Shanghai. According to sources, Tesla aims to regain the ground lost in the second-largest market due to a price war and competition from local players.

The US-based EV maker is working on its newer version of Model Y with a project codename "E41" and is likely to build this new Tesla EV in the existing production line. The mass production of the new Tesla Model 1 is expected to begin in 2026.

The sources claim the E41 will be smaller and comparatively 20% more affordable than the refreshed Model Y launched last year. The Tesla Model Y, a mid-size SUV crossover, costs 263,500 Yuan (Approx. AED 133,500) in China.

This Shanghai-made Model Y will be sold primarily in China to maintain and regain Tesla's market position. However, the model will likely be produced in Europe and North America for global customers.

In January, Elon Musk, CEO of Tesla, announced that the EV maker would introduce lower-cost models in the middle of 2025 but was not informed of the vehicle's cost reduction, pricing, or size.

Between 2023 to 2024, the Tesla Model Y was the best-selling electric car in China, but in recent years, it has seen increased competition from domestic players like BYD. The Xiaomi YU7 crossover has been the strongest rival to the Tesla Model Y since its launch this year.

Tesla's battery-only EV market in China dropped from 11.7% to 10.41% last year. According to industry reports, Xiaomi, the world's third-largest smartphone manufacturer, has also started selling electric cars. With its Xiaomi SU7 sedan, it has outsold Tesla's Model 3 on a monthly basis since December.

Tesla has not yet announced introducing new models in the market; instead, it's reportedly working on existing models to rival its competitors in China.