April 9, 2026 – 3:01 AM PDT
Tesla is working on a brand new, smaller, and more affordable electric SUV, according to informed sources. Recently, the company reached out to suppliers to discuss the compact SUV, which will not be a variation of the existing Model 3 or Model Y. Talks included the manufacturing process and component specifications.
Three sources indicated that this compact SUV would be produced in China, with ambitions to expand production to the U.S. and Europe later on. The vehicle is expected to measure about 4.28 meters in length, roughly 14 feet—considerably shorter than the popular Model Y, which is around 15.7 feet long.
This development comes after CEO Elon Musk decided to cancel a previously planned low-cost EV project in 2024, shifting Tesla’s focus toward robotaxis and humanoid robots. There’s some speculation about whether this new SUV marks a return to the mass-market EV approach or aligns more closely with the push for fully autonomous vehicles.
One source noted that this model could potentially fulfill both needs, suggesting that it might be driverless yet still provide an option for human control. While aiming for full autonomy, Tesla recognizes that many global markets may not adopt driverless technology for a long time. Therefore, retaining the option for conventional driving controls might enhance sales and keep production lines efficient.
As Tesla moves toward this driverless future, analysts predict a third consecutive year of declining sales for its traditional electric vehicles, which have been the backbone of its revenue. Currently, the company operates a limited number of robotaxis in Austin, Texas, many of which still have a safety driver on board.
Tesla has not commented on the development of this new vehicle. The sources mentioned that the project is still in its early stages, and it remains unclear if Tesla has authorized production.
Historically, Tesla has had several projects that faced delays or were entirely scrapped. For example, concept models for a Roadster and Semi truck were showcased back in 2017 but have yet to hit the market.
Two insiders revealed that Tesla aims to price this new vehicle significantly lower than its base Model 3 sedan, which costs around $34,000 in China and about $37,000 in the U.S. Cost reduction strategies could include using a smaller battery, resulting in a shorter driving range compared to the Model Y’s range of 306 to 327 miles.
Additionally, one source mentioned that Tesla would utilize a single electric motor rather than the dual-motor setup found in its current models. The goal is to make the new SUV lighter, targeting a weight of around 1.5 metric tons compared to the Model Y’s two tons.
Production of the new model is expected to occur at Tesla’s Shanghai factory, but the timeline remains uncertain; it’s unlikely to start this year.
Tesla’s path toward creating affordable electric vehicles has seen many false starts. Musk has often claimed that the goal is to create mass-market electric vehicles essential for combating climate change, but these efforts have stalled over the years.
In 2020, Musk set an ambitious goal of selling 20 million vehicles annually by the decade’s end—almost double that of Toyota’s current sales. A project referred to as the “Model 2,” aimed at producing a $25,000 EV, was expected to be a game-changer for growth.
However, by 2024, Tesla abandoned the Model 2, though it planned a driverless robotaxi using the same platform. Competitors in China have already begun releasing cheaper electric options. Later that year, Musk suggested it would be “pointless” for Tesla to focus on making a low-cost EV for human drivers when the future is geared toward autonomous vehicles.
A former Tesla manager noted that developing a new, affordable traditional car would signal a major shift from the company’s current philosophy. Until mid-2025, Tesla had prioritized robotaxis to lower per-mile costs for riders, sidelining the mass-production of entry-level vehicles.
After the Model 2 was scrapped, Tesla executives spoke vaguely about plans for “more affordable” EVs. However, when new models finally arrived last fall, they were merely downsized versions of the existing Model 3 and Y, offered at slight discounts.
Prices for the Model 3 Standard and Model Y are $36,990 and $39,990, respectively, which some investors feel are still too high to attract a broader range of customers, and there hasn’t been a significant improvement in overall sales.
On the surface, Tesla continues to emphasize its plans for robotaxis and humanoid robots, a strategy that has kept the company’s stock value soaring. Tesla’s market cap stands at approximately $1.3 trillion, overshadowing its financial fundamentals, even when compared to other high-performing tech firms. Last year, investors approved a massive compensation package for Musk, potentially worth up to $1 trillion in stock if he meets certain targets.
Tesla is planning to start production this month on a two-door Cybercab robotaxi, first announced as a concept vehicle in 2024, which lacks traditional controls like steering wheels and pedals. However, it’s still unclear when this vehicle will be available for sale or join the Tesla robotaxi fleet. The company has yet to apply for the necessary federal exemption to sell vehicles without conventional driving controls, according to a spokesperson for the National Highway Traffic Safety Administration.
