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Tesla to Launch 'Affordable' Model Y Next Year to Compete In China

Word on the StreetFriday, Mar 14, 2025 7:18 am ET
2min read

To defend its market share in China, tesla is secretly developing a low-cost Model Y.

According to insiders, Tesla is developing a Model Y in Shanghai with at least a 20% reduction in production costs. Codenamed E41, the vehicle will be manufactured using existing production lines and is targeted for mass production by 2026 to address the increasingly competitive environment in the Chinese market.

Citing sources familiar with the matter, the report states that this model will be smaller than the refreshed Model Y launched at the end of last year, with production costs reduced by at least 20%. Currently, the Model Y retails in China starting at 263,500 RMB.

The new vehicle will adopt a depop development approach, meaning it will simplify configurations while maintaining core functionalities to enable a faster rollout.

This move is a key strategy for Tesla to counter its declining market share in China. Data shows that Tesla's share in China's pure electric vehicle market has dropped from 11.7% in 2022 to 10.4% in 2023.

While the model is primarily aimed at the Chinese market, Tesla also plans to produce it in Europe and North America.

Tesla's Global Sales Slump and Stock Plunges

Tesla is currently facing a global sales crisis. In February 2025, Tesla's total sales in China were only 30,688 units, a 49% year-on-year drop, marking the worst performance since July 2022. Among these, Model Y sales were 8,006 units, a staggering 77% decline.

China, Tesla's largest global market, is also one of its most competitive. From December 2024 to February 2025, the Xiaomi SU7 outsold the Model 3 for three consecutive months, becoming the champion in the pure electric sedan market.

The Model Y faces equally severe challenges. The Huawei HarmonyOS-powered Zhijie R7 has accumulated over 80,000 orders in five months since its launch. Competing models like the Xiaomi YU7, Xpeng G7, and Li i7, which target the same segment as the Model Y, are set to hit the market in 2025.

The recently launched refreshed Model Y has underperformed in the market. From opening pre-orders on January 10 to starting deliveries on February 26, Tesla received 200,000 orders, including refundable deposits. However, in the first week of deliveries, only over 6,000 units were delivered, compared to the usual 10,000 or more in the past.

The crisis is not limited to China. In January 2025, Tesla's sales in Europe fell by 45%. In Germany, Tesla's total deliveries from January to February were only 2,706 units, a 70.6% year-on-year drop. Sales in the U.S. have also declined for four consecutive months.

This global sales slump has directly led to a sharp drop in Tesla's stock price. During Monday's trading session, Tesla's stock fell by 15%, marking its largest single-day drop since September 2020, reflecting growing investor concerns about the company's future.

Can This Strategy Work?

Tesla's challenges go beyond pricing; its product competitiveness is also declining. In terms of "intelligence", Tesla's early-mover advantage is fading. For example, while domestic automakers' smart voice systems now support dialect input, continuous command input, and wake-word-free operation, Tesla's system still requires specific wake words.

In the field of autonomous driving, Tesla's FSD only became available in China in early 2025 and has underperformed. In contrast, domestic automakers have extended their autonomous driving capabilities to full-scenario applications, including overtaking, cutting in, and even autonomously exiting parking garages.

Analysts believe that Tesla's strengths still lie in its stable product quality and excellent electric control capabilities, but these alone are insufficient to sustain growth in the Chinese market.

Elon Musk stated in January that Tesla would launch a low-cost model in the first half of 2025 but did not specify the cost reduction, pricing, size, or specifications. In addition to the low-cost Model Y, Tesla plans to introduce a six-seater Model Y in China and bring FSD to the Chinese market.

For investors, whether Tesla can maintain profitability while enhancing product competitiveness amid a price war will be a key factor determining its stock performance.

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1 hour ago
@Andrew ford How long you been holding onto 🚀 and what other stocks you got in your portfolio? Curious if you think Tesla's gonna bounce back or nah.
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15 hour ago
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Doxfinity
16 hour ago
$TSLA big changes are there for a reason watch and see
0
17 hour ago

It’s so weird how Teslas built in China must be higher quality and cheaper in order to sell in that market.


I wish the US government handled businesses that way, instead of just openly being for sale to the highest bidder.


0
Witty-Performance-23
15 hour ago
@ US gov's role is diff, yea?
0
Historical_Ebb_7777
15 hour ago
@ True, China market's different.
0
ImplementEither7716
17 hour ago
Tesla's new E41 model could be a game-changer if it hits the sweet spot in pricing. Fingers crossed.
0
the_doonz
17 hour ago
Tesla's dip in China is wild. New models might help, but they need to step up their game on autonomy and voice control.
0
SussyAltUser
17 hour ago
Low-key thinking of holding my $TSLA till they bounce back. Long-term plays, folks. Can't let short-term noise shake ya.
0
MacaroniWithDaCheese
13 hour ago
@SussyAltUser How long you planning to hold $TSLA? Thinking years or just riding till next bull run?
0
aj_cohen
17 hour ago
E41 could be a game-changer if it hits the sweet spot. Gotta keep an eye on those production costs, though.
0
iamsam22222
17 hour ago
If Tesla can pull off a 20% cost cut without sacrificing quality, that's a win. But will it be enough to stop the slide? 🤔
0
SelectHuckleberrys
15 hour ago
@iamsam22222 Rebut: Cutting costs might help, but Tesla's tech gap is a bigger issue.
0
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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