Citing anonymous sources familiar with the project, Reuters reported Thursday that Tesla is developing a new compact SUV model that would be priced below its other electric vehicles, including the $36,990 Model 3.
It's too early to say whether the project will reach the production stage or what the timeline might be for such a vehicle. But if true, it indicates that the company would be looking to expand its portfolio with an eye toward addressing pricing pressures and increased competition in the EV market. Chinese companies such as BYD have made strides in quickly developing inexpensive EVs that have challenged the world's top EV-makers abroad.
According to the report, production of a new Tesla vehicle might be done in China, with some expanded production in the US and Europe. It would be smaller than Tesla's Model Y SUV.
A representative for Tesla did not respond to a request for comment.
Tesla CEO Elon Musk was previously said to be pivoting away from plans for a low-cost EV in the $25,000 range a few years ago, but the latest report suggests this new car may lean more heavily into autonomous driving technology while also reviving the original project. This vehicle could offer a human-driven option to wait out regulatory issues with autonomous cars while still using self-driving as its core technology.Â
A new US EV company, Slate Auto, recently announced plans to make an electric truck that would sell for around $25,000. The company is partially backed by Amazon founder Jeff Bezos.Â
In recent years, Tesla has been more focused on developing robots and autonomous taxi services.Â
Slim pickings in the low-cost EV market
If Tesla were to succeed in building a mass-market EV in the $25,000 range, it would be unique in the industry: Only a few electric vehicles currently available in the US have a base price of under $30,000, including the Nissan Leaf, Hyundai Kona Electric SE and Mini Cooper SE.
American consumers are demanding less expensive cars given affordability issues and inflation, but they're largely unwilling to give up larger-sized cars or creature comforts that compact cars don't offer, said Jessica Caldwell, head of insights at Edmunds.
"People don't necessarily want a cheap mode of transportation," Caldwell said in an interview. "When you think about the market at large, this under-$30,000 EV is something people keep harping on. We don't even hold the internal-combustion market to that standard."
The average price of a non-EV in the US is currently well over $45,000, she said.
While Tesla's brand may have been tarnished in recent years by Musk's political activity, it still has strong awareness among consumers. A new vehicle model could solve another problem that Tesla has, apart from brand damage and competition: the sense that its cars are not new anymore.
"Although their products have been refreshed, their cars have largely been the same," Caldwell said. "The Model 3 has been going on eight years now. People like to see change."
As far as cheap Chinese EVs complicating the picture for Tesla's low-cost-vehicle prospects, Caldwell said, currently, tariffs make them so expensive they lose their cost advantage. But, she said, "they'll be here one day."
