Share Tesla is developing a new, smaller, and significantly cheaper electric vehicle to sit below the Model 3 in its current line-up, according to a report from Reuters. The long-rumoured “entry-level” Tesla, often referred to informally as the Model 2, is expected to start at approximately $25,000 (£20,000), marking Elon Musk’s most aggressive attempt to move the brand into the mass-market segment. The move comes as Tesla faces intensifying pressure from Chinese manufacturers, such as BYD, which have flooded international markets with affordable electric hatchbacks. By lowering the cost of entry, Tesla aims to revitalize sales volumes that have slowed as the premium EV market reaches saturation. Sources familiar with the matter told Reuters that the new vehicle is being developed under the internal codename “Redwood” and will utilize a revolutionary “unboxed” manufacturing process designed to slash production costs by 50%. Challenge to European and Chinese rivals The launch of a $25,000 Tesla creates a direct threat to the newly unveiled Cupra Raval and the Renault 5, both of which are targeting the £23,000 price bracket. While Tesla has dominated the luxury and mid-range EV sectors, it has historically struggled to produce a profitable vehicle at a sub-$30,000 price point. The new platform is expected to feature a more compact battery pack and a simplified interior to meet the aggressive pricing target. According to industry sources, production for the “Redwood” platform is now slated to begin in late 2026 . Initial manufacturing is expected to centre on Gigafactory Shanghai, with a subsequent rollout at Tesla’s facilities in Texas and Berlin to follow in early 2027. Analysts suggest that the success of this smaller model is vital for Tesla’s long-term strategy. By establishing a high-volume, affordable vehicle, Tesla creates a massive fleet of hardware to feed data into its Full Self-Driving (FSD) software. While Tesla China has officially labelled the report “inaccurate,” the detailed specs, including a target weight of 1.5 metric tonnes and a shorter 4.28m length, suggest that Tesla may finally be ready to join the budget EV price war in earnest. For latest tech stories go to TechDigest.tv Share this: