Tesla, Inc. is developing a new, smaller and more affordable electric SUV, according to four people familiar with the matter who spoke to Reuters.
The compact SUV is being positioned as a completely new model rather than a variant of the existing Model 3 or Model Y, with discussions already underway with suppliers regarding design specifications and manufacturing processes.
Three of the sources said the vehicle is expected to be produced primarily in China, while one noted that production could also be expanded to the United States and Europe depending on demand and capacity.
The new SUV is reportedly about 4.28 meters in length, making it significantly smaller than the Model Y, and is expected to feature cost-saving measures such as a smaller battery, reduced driving range, and a single-motor configuration.
The project reflects Tesla’s ongoing effort to balance its long-term vision for autonomous driving with continued demand for affordable, mass-market electric vehicles, even as CEO Elon Musk has previously shifted focus toward robotaxis and humanoid robotics.
Analysts suggest the move could signal a partial return to traditional EV development, especially as Tesla faces declining sales in its conventional electric vehicle lineup amid growing global competition.
The vehicle remains in early development, and it is not yet confirmed whether Tesla has officially approved production, with the company having a history of delaying or revising major product plans.
If launched, the compact SUV could be priced significantly lower than the Model 3 and Model Y, potentially helping Tesla expand its customer base in key global markets where affordability remains a major barrier to EV adoption.
Tesla continues to emphasize its future plans for robotaxis and autonomous vehicles, but the introduction of a cheaper SUV suggests the company may still see value in strengthening its core passenger car business alongside its long-term technological ambitions.
