Tesla's New Affordable EV: Everything We Know

Tesla has been hyping up a $25,000 EV for years. Here's what we expect.

By: Tim Levin

Updated: Jul 24, at 1:44pm ET

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The so-called Tesla Model 2 may be the most hyped electric car that the world knows next to nothing about. Nobody is even sure that the new model is actually coming. But if it is, it’ll be a huge deal.

Tesla CEO Elon Musk has talked up the idea of a cheaper, entry-level Tesla since at least 2020. Such a model would open up a vast new market for the electric automaker and go a long way toward bringing affordable electric vehicles to the masses. But right now, pretty much everything about it is TBD.

What Do We Know About The More Affordable Tesla?

For the longest time, Tesla investors and fans believed that a smaller, cheaper EV than the Model 3 sedan would be the automaker’s next act after the Cybertruck pickup. Musk and other Tesla executives spoke of a lower-cost “next-generation” vehicle during earnings calls and presentations. The Tesla fandom even made up a name for the new car. “Model 2” isn’t official.

An April Reuters story cast a cloud of uncertainty over those plans by claiming that Tesla had scrapped plans for a cheaper model. (Musk denied the claims.)

Musk opened up Tesla’s next earnings call in April with a curveball: He said Tesla would accelerate the release of new models.

“These new vehicles, including more affordable models, will utilize aspects of the next-generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up,” Tesla’s first-quarter earnings release said.

The company elaborated somewhat in Q2's earnings call release as well in July: “Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next-generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So, for now, it looks like a new entry-level Tesla is in the works in some form or another. It just will rely on Tesla’s current technology instead of using the brand-new EV platform that the company had advertised was coming for years.

When Will The Tesla Model 2 Go On Sale?

In January, Musk said Tesla’s next-generation vehicle would “hopefully” launch in the second half of 2025. Then in April, he said production would start by early next year, if not the end of 2024. By July, we were hearing the first half of 2025 again.

Musk is admittedly not the best at timing, so we’ll have to see how that aggressive timeline pans out in reality.

Another caveat: While Tesla said that it’s accelerating the timeline for new models, it didn’t specify which of those new models will come first.

Where Will Tesla Build It?

Initially, Tesla aimed to build its next-generation platform—which it has said will serve as the basis for both a cheaper model and a purpose-built robotaxi—at a new plant in Mexico. The company has since changed course, planning to start production at its existing factory near Austin, Texas, so Musk and Tesla's engineers can be on hand.

Still, we don’t know how Tesla’s shift from its next-generation platform to this hybrid-platform approach will impact future manufacturing plans.

What Will The Next Tesla Look Like?

Last year, Musk said that Tesla’s upcoming, high-volume model would look “much more conventional” than the Cybertruck.

In January, Reuters reported that Tesla was developing a compact crossover, codenamed “Redwood,” that would enter production in 2025. That sort of body style would make sense, at least in the U.S. where crossovers are king. Likewise, in May The Information reported that the Model 2 resembled a "slimmed-down Model Y."

But again, since Tesla’s plans have reportedly been all over the place, it's not crystal clear what's in store. On Tesla’s April earnings call, Musk ducked a question about whether the “new vehicles” would be variations of existing Teslas or completely new designs.

How Much Will This Tesla Cost?

Back in 2020, Musk said that a $25,000 Tesla would arrive in three years. (That didn’t happen, clearly.) Since then, Tesla has kept quiet about the next-generation vehicle’s pricing. But the Model 3’s current price structure gives us some hints, since any “more affordable” car should cost less.

The Model 3 Rear-Wheel Drive will run you $38,990, before taxes and fees. So the Model 2 wouldn’t have to cost $25,000 to stand out. A price point in the low $30,000 range would open up Tesla to a wider range of buyers. And if Tesla could make a, say, $32,500 Model 2 qualify for the $7,500 federal incentive for EV purchases, the effective cost to consumers could land around $25,000 anyway.

Contact the author: tim.levin@insideevs.com

Artwork credit Theophilus Chin.