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Tesla is set to introduce a more cost-effective version of its Model Y in Shanghai, China, reported Reuters citing three people with knowledge of the matter.
The move comes as the firm attempts to defend its market position in China, where it faces increasing competition.
The new variant, part of a project codenamed "E41", is expected to be at least 20% cheaper to produce than the current Model Y, two sources said.
It is planned to be manufactured using existing production lines at Tesla's largest factory by output, starting mass production in 2026.
The scaled-down Model Y will mainly cater to the Chinese market, with plans to also roll out the vehicle in Europe and North America.
The company’s plan to make a lower-cost Model Y was initially reported by Chinese media company 36Kr.
Tesla is focusing on variations of existing models to stay competitive, particularly in China.
A six-seat version of the Model Y is slated for release in the Chinese market later this year, the sources said.
Tesla CEO Elon Musk had previously mentioned introducing lower-cost models by the first half of 2025.
In recent years, Tesla's Model Y has been the top-selling car in China, but domestic manufacturers have introduced at least six competing models.
In China, Tesla's share in battery-only EV market decreased to 10.4% in 2024, compared to 11.7% a year ago period.
Since December 2024, Xiaomi's SU7 sedan has surpassed Tesla's Model 3 in monthly sales.
Last week, Tesla reportedly entered a partnership with Baidu to enhance the performance of advanced driving assistance (ADAS) system in China.
"Tesla plans to launch Model Y ‘cost-effective version’ in China – report" was originally created and published by Just Auto, a GlobalData owned brand.
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