Tesla is reportedly resurrecting its long-discussed $25,000 Model 2 vehicle project, codenamed NV91 and NV93, after pausing it earlier this year. The company is also planning cheaper versions of the Model Y and Model 3 for the Chinese market. These moves come amid efforts to compete with affordable electric vehicles from rivals like BYD.
Tesla has placed its Project Redwood, aimed at producing a $25,000 electric vehicle tentatively called the Model 2, back on the development agenda after shelving it in February 2024 to prioritize the Cybercab and Robotaxi platforms. Insiders indicate the NV91 project, a compact crossover styled after the Model Y but with smaller dimensions and a 54 kWh battery offering about 250 miles of range, is advancing. The vehicle would include next-generation AI5 Full Self-Driving hardware, with a potential release in the fourth quarter of 2026, following facelifts for other models in 2025.
In parallel, Tesla plans to introduce base trims of the Model Y and Model 3 in China under codenames E41 and D50. These simplified versions inherit design elements from the current models and are expected to be priced $5,000 to $5,500 cheaper than the recently announced U.S. Standard trims, which start below $40,000 after removing over 20 features like light bars and larger battery options. Unlike the U.S. versions, Chinese adaptations will tailor hardware and comfort features to local preferences, potentially including AI5 FSD hardware to differentiate from competitors.
Tesla's chief designer Franz von Holzhausen previously stated that rumors of abandoning the $25,000 car were 'greatly exaggerated' and urged to 'stay tuned.' CEO Elon Musk described the Model 2 as 'smaller, to be clear.' However, a report from European outlet 36kr suggests these cheaper Chinese models would only launch if the Standard trims underperform in sales, a claim some analysts view as unlikely given Tesla's recent focus on the sub-$30,000 Cybercab. This strategy aims to boost market share in China, where rivals like BYD offer more affordable options.