Tesla Making Cheaper Compact SUV for Under $34,000: Report

Tesla is working on a new smaller and cheaper electric SUV, according to sources cited by news agency Reuters. This is a significant reversal for the electric vehicle (EV) maker whose chief executive Elon Musk declared building affordable cars for human drivers "pointless" just two years ago. Four people familiar with the matter were quoted as saying that the planned compact SUV would be manufactured at Tesla's Shanghai facility and priced well below the Model 3's starting price of $34,000 in China and $37,000 in the US. The vehicle is said to measure 4.28 metres in length, considerably shorter than the Model Y's 4.75 metres, and would weigh around 1.5 metric tonnes compared with the Model Y's 2 metric tonnes.

To achieve a lower price point, Tesla is reportedly planning to fit a smaller battery pack, accepting a reduced range compared with the Model Y's 306-to-327-mile rating, and a single electric motor in place of the dual-motor configurations available on existing models. 

The report added that the production would be centred in Shanghai, with one source adding that Tesla intends to eventually extend manufacturing to the US and Europe. The project is said to be at an early stage and it could not confirm whether Tesla had formally approved it for production. A start date in 2026 was said to be unlikely. Tesla did not respond to a request for comment.

The report marks a notable shift in direction. In 2024, Musk scrapped a planned $25,000 electric car, internally codenamed NV9, in favour of redirecting resources towards the company's Robotaxi programme. At the time, Musk argued it would be "pointless" and "silly" to develop affordable EVs for human drivers on the basis that fully autonomous vehicles would soon render conventional car ownership redundant.

That decision was taken against the advice of virtually every senior Tesla executive. According to earlier reporting, Musk overrode an internal assessment produced by the heads of vehicle programmes, engineering, business development and design, which had concluded that the Robotaxi business would not be profitable and that Tesla ought to focus on the affordable EV instead.