Tesla is developing a new compact electric SUV priced below the $36,990 Model 3 and measuring 168 inches (4.3 meters) long—shorter than the Model 3 (185.8 inches) and Model Y (188.7 inches)—according to Reuters citing four anonymous supplier sources. The all-new design awaits CEO Elon Musk's production approval and may launch first in China before expanding to U.S. and German factories, signaling a pivot back to core vehicles after a focus on robotaxis and humanoid robots.
The project comes after Tesla scrapped plans for a $25,000 'Model 2' in 2024, amid declining sales, excess inventory, and projected free cash flow turning negative from $6.2 billion at end-2025 to -$5.8 billion, per Bloomberg. Musk had shifted emphasis to Cybercabs—autonomous two-seaters priced under $30,000, with rollout now 'painfully slow'—and the Optimus robot, but the new SUV can serve as both a conventional and autonomous vehicle.
A Tesla spokesperson did not comment. Production faces challenges like 100% U.S. tariffs on Chinese imports. The move counters pricing pressure from rivals like China's BYD and demand for sub-$30,000 EVs; U.S. options like the Nissan Leaf and Hyundai Kona Electric SE are rare, noted Edmunds' Jessica Caldwell, as average non-EV prices top $45,000. In Germany, the Model 3 sells for around €37,000.
