The Tesla Model Y is getting an even lower-cost version to help stave off Chinese competition.
Reuters reports word from sources that this more affordable Model Y, codenamed E41, will be built on existing production lines at Tesla’s Shanghai plant.
Mass production will reportedly begin in 2026.
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The E41 will reportedly be at least 20 per cent more affordable to produce than the refreshed Model Y revealed recently, though interestingly the sources also said the car will be smaller.
According to Reuters, these Chinese-built vehicles will be “mainly sold in China” to help Tesla defend its market share there.
However, sources told the news outlet that this more affordable version will also be produced in Europe and North America, though a timeframe wasn’t specified.
That indicates the E41 won’t be exclusive to China, and therefore it could come to Australia. All Tesla vehicles sold in Australia are sourced from China.
It’s unclear just what changes will be made to the Model Y to make it both smaller and more affordable to produce.
We expect features like the ventilated front seats and rear 8.0-inch touchscreen of the updated Model Y to be on the chopping block, however.
While the Model Y was still the best-selling car in China in 2023 and 2024, Reuters reports Tesla’s share of the Chinese EV market dropped from 11.7 per cent in 2023 to 10.4 per cent last year.
The Model Y is facing a deluge of competition, with Chinese rivals including the BYD Sealion 7, Deepal S07, Leapmotor C10 and Xpeng G6 – all of which are now sold in Australia too.
Not only that, but smartphone maker Xiaomi is also launching its first SUV, the YU7. Given the brand’s SU7 sedan has reportedly outsold Tesla’s Model 3 each month since December, the Xiaomi SUV is shaping as a credible threat.
Tesla priced the updated Model Y range for Australia back in January, with the base model now starting at $63,400 before on-road costs – an increase of $7500 on the pre-update model.
However, this was a Launch Series edition, which no longer appears on Tesla’s local site. It remains to be seen what the new base price will be once the ‘regular’ version arrives.
The pre-update range opened at $55,900 before on-road costs, undercutting rivals from Japanese, Korean and American brands.
MORE: Everything Tesla Model Y
