Tesla Prepares Lower-Cost Model Y to Bolster Competitive Edge in China

The company aims to reduce production costs by 20% for a smaller Model Y, with mass production planned at its Shanghai factory in 2026.

Tesla is reportedly developing a smaller, lower-cost Model Y under the codename 'E41,' aimed at reducing production costs by at least 20%.
Mass production of the new Model Y is planned for 2026 at Tesla's Shanghai Gigafactory, primarily targeting the Chinese market.
The refreshed Model Y, launched earlier this year, has seen increased production and deliveries in China, but sales remain under pressure from domestic competitors like BYD and Xiaomi.
Tesla's market share in China's EV segment declined to 10.4% in 2024, down from 11.7% the previous year, highlighting the intensifying competition.
While Tesla's registrations in Europe and other markets dipped early in 2025, production ramp-ups for the updated Model Y are expected to drive a rebound in sales.