Key Points
- Reuters sources indicate Tesla is creating a compact SUV, measuring shorter and costing less than the Model Y.
- The vehicle would stretch approximately 4.28 meters in length, with primary manufacturing planned for China and potential future facilities in the US and Europe.
- Tesla’s delivery numbers have declined two years running — dropping from 1.81 million units in 2023 to 1.64 million in 2025.
- TSLA shares have tumbled roughly 24% since January and appear headed toward an eighth consecutive weekly loss.
- The initiative remains in preliminary stages; manufacturing is expected to begin after 2025, with Tesla offering no official confirmation.
Tesla appears to be developing a brand-new compact SUV — positioned as smaller and more affordable than the Model Y — representing what would be the company’s first completely fresh passenger car design since 2020.
Reuters spoke with four individuals who have knowledge of the situation, reporting that Tesla has begun conversations with suppliers regarding production specifications and component requirements. The vehicle would span approximately 4.28 meters (roughly 14 feet), while the Model Y measures 15.7 feet.
Three individuals confirmed that manufacturing would center on Tesla’s Shanghai production facility. A fourth source indicated the company intends to eventually establish manufacturing capabilities in the US and European markets as well. Tesla declined to provide comment when contacted.
The upcoming model would carry a price tag beneath the base Model 3, which presently retails for approximately $37,000 in the US market and $34,000 in China. Tesla intends to achieve this pricing through the use of a reduced-capacity battery, single-motor configuration, and a target weight of around 1.5 metric tons — approximately 25% lighter than the Model Y.
The smaller battery pack would result in reduced driving range compared to the Model Y’s 306–327 mile capacity. This compromise enables a more accessible price point that could attract consumers who find current Tesla models financially out of reach.
Reconsidering Previous Decisions
This development follows Musk’s 2024 decision to cancel the widely anticipated “Model 2” program, reallocating those resources toward robotaxi development and humanoid robot projects. Musk stated at that time that creating a $25,000 human-operated electric vehicle would be “pointless.” The emergence of this new SUV project suggests Tesla may be reevaluating that position.
One source indicated Tesla’s current strategy centers on building vehicles designed primarily for autonomous operation while maintaining manual driving capabilities. This dual-functionality approach would enable Tesla to market vehicles across regions where complete autonomy remains either illegal or lacks widespread consumer acceptance.
The program remains in early development phases. Reuters was unable to verify whether Tesla has formally authorized production to proceed. Tesla’s track record includes the Roadster and Semi, both presented as concepts in 2017 yet still awaiting full-scale production — giving investors legitimate grounds for measured expectations.
Delivery Numbers Show Consistent Decline
Tesla’s delivery figures paint a clear picture. The company delivered 1.81 million vehicles in 2023, followed by 1.79 million in 2024, then 1.64 million in 2025. Analyst projections from FactSet anticipate a slight rebound to 1.72 million units this year.
The simplified “standard” editions of both the Model 3 and Model Y, introduced last fall at price points of $36,990 and $39,990 respectively, have failed to generate significant sales momentum.
TSLA shares have fallen approximately 24% year to date and stand more than 30% below the 52-week peak near $500 reached in December. The stock appears poised to record eight consecutive weeks of declining value.
The Cybercab robotaxi, presented as a prototype in 2024, reportedly begins production this month — though Tesla has yet to apply for the federal regulatory exemption required to manufacture and sell a vehicle lacking both steering wheel and pedals.
