Reports hint at Tesla’s comeback for $25,000 car

Tesla launched simpler versions of its Model 3 and Model Y on October. These updated trims are now about $5,000 less than before. Tesla removed things like the premium sound system, ventilated seats, rear touchscreen, and ambient lighting and many other features from these trims.

However, Many investors did not like the update. Tesla’s stock dropped nearly 4 percent after the announcement. Some analysts said slashing features didn’t solve the real issue of affordability.

Tesla’s cheaper models in China

Some reports from Chinese media say Tesla is working on new, budget cars in China. According to latest reports, two separate projects called E41 and D50 are now underway at Tesla’s Shanghai plant. These will be more basic versions of Model 3 and Model Y, using fewer parts and sharing components. This method should help cut prices by another $5,000, bringing lower-cost options close to $30,000 and Tesla might start making these cars around mid-2026.

They also restarted its previous plans for small, affordable vehicles NV91 (supposed to be a $25,000 car) and NV93. But it was put on hold in early 2024.

Elon Musk reportedly made that call because Chinese companies like BYD sell cheaper electric cars. Still, Tesla’s worldwide sales dropped 5.9 percent in 2025, so the Tesla might need to rethink its decisions.

People are calling this possible new model “Model 2.” and might offer a 53–54 kWh battery pack, giving a range of 250-300 miles. Tesla is expected to use new self-driving tech in it. The design would probably look like a compact SUV, almost like a small Model Y.

Tesla received a patent for a new “unboxed process” to build these vehicles in September 2025. This process paints car sections before assembling them, then joins everything at the end. This skips long assembly lines and cuts wastage. Based on this, making cars at a lower price will be faster and easier for Tesla.

In 2020, Musk spoke about a $25,000 car at the Battery Day event. But in the third quarter of 2024, Musk said launching “a regular $25,000 model would be pointless.” He believes cost per mile matters more than just price, so Tesla has moved its focus to autonomy.

Competition from China and Europe

Tesla faces strong competition globally. BYD earned $107 billion and sold 4.27 million electric vehicles in China last year. Tesla’s sales were lower at 1.8 million, with only a 6 percent share of the Chinese market. BYD’s most basic EV sells for $17,000, far below Tesla Model 3’s price. At the same time, Tesla’s car registrations in Europe were down 43 percent in early 2025. In April, BYD outsold Tesla there. Tesla’s U.S. market share went from 49 percent to 41 percent over a year, and global deliveries for 2025 fell about 6 percent.

Making cheaper cars would help Tesla increase sales and collect more driving data for Tesla’s Full Self-Driving software. Analysts expect Tesla to use its Shanghai factory to make small, simplified cars for buyers with tighter budgets.

E41 and D50, the new vehicle projects, might use the same base as Model 3 and Model Y. Still, Tesla will cut back on tech and comfort to keep costs down.

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