Tesla is planning a new compact, lower-cost electric SUV: Report

Tesla is working on a new, smaller and more affordable electric SUV, according to a Reuters report. The project is said to be in early development, with the carmaker recently reaching out to suppliers to discuss components, specifications and manufacturing processes. Unlike existing models such as the Tesla Model 3 and Tesla Model Y, this will be an entirely new product.

The report states that the SUV could measure around 4.28 metres in length, making it smaller than the Model Y. Production is expected to begin in China, with potential expansion to the United States and Europe at a later stage. However, timelines remain unclear, and the project has not yet been officially approved for production.

The development comes after CEO Elon Musk shifted focus away from a previously planned low-cost EV in 2024, prioritising robotaxis and autonomous technology instead. This new SUV could reflect a partial return to mass-market electric vehicles, although it may also be designed to support both human-driven and future driverless use cases.

To reduce costs, Tesla is reportedly considering a smaller battery pack, a single-motor setup, and a lighter overall structure. The target is to price the vehicle below the Model 3, which currently starts at around $34,000 in China and $37,000 in the U.S.

The move comes at a time when Tesla faces slowing EV sales growth and increasing competition, particularly in China’s lower-cost segment. While the company continues to push its autonomous ambitions, the report suggests it may need more accessible products to maintain volumes in the near term.

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