Tesla planning low-cost Model Y in China. Will India get it too?

Production will take place at Tesla's Shanghai factory, its largest production hub, and mass production is expected to begin in 2026.

In Short

• Tesla plans cheaper Model Y for China amid price war
• New Model Y to be 20% cheaper to produce for Tesla
• Tesla's market share in China drops to 10.4% in 2023

Tesla is preparing to introduce a lower-cost version of its best-selling Model Y in China as part of its efforts to regain market share amid an ongoing price war, reported news agency Reuters.

The new version of the Model Y, being developed under the codename "E41", will be smaller and at least 20% cheaper to produce than the refreshed Model Y launched in 2023, two of the sources cited in the report said.

Production will take place at Tesla's Shanghai factory, its largest production hub, and mass production is expected to begin in 2026.

The new budget-friendly Model Y will mainly target the Chinese market, one of the sources told Reuters. However, there are also plans to produce it in Europe and North America, though no timeline has been provided.

Tesla CEO Elon Musk had earlier stated that the company would launch lower-cost models in the first half of 2025, but he did not provide details about their pricing, specifications, or production plans.

WILL INDIA GET THE LOW-COST MODEL Y?

While the new affordable Model Y is expected to be produced in China, Europe, and North America, Tesla has not disclosed whether it will be introduced in India.

Tesla has been in discussions with the Indian government regarding local manufacturing and lower import duties, but no official announcements have been made.

COMPETITION FROM CHINESE AUTOMAKERS

The Model Y has been a top-selling electric vehicle (EV) in China, holding the position of best-selling car in 2023 and 2024. However, competition has intensified as domestic Chinese brands have introduced at least six rival models over the past year.

Tesla's market share in China’s battery EV segment dropped to 10.4% in 2023 from 11.7% in 2022, according to Reuters. One of its strongest emerging rivals is Xiaomi, which recently entered the EV market.

Xiaomi’s SU7 sedan has outsold Tesla’s Model 3 on a monthly basis since December. The company is also set to launch a YU7 crossover SUV, which analysts believe could pose a strong challenge to the Model Y.

TESLA’S STRATEGY TO STAY COMPETITIVE

Rather than launching entirely new models, Tesla has been focusing on making quick updates and variations of its existing models. Along with the new lower-cost Model Y, Tesla also plans to introduce a six-seat variant of the Model Y in China later this year, sources said.

In addition, Tesla has announced its "Cybercab" autonomous robotaxi, which is scheduled for launch in 2026.