Tesla may be working on its most affordable electric vehicle to date, featuring SUV design elements and significant reductions in costs.

      It may be available in both autonomous and manual driving versions.

      Tesla has stopped producing the Model S and X electric vehicles earlier this year, now only offering the Model 3 and Cybertruck. However, the company appears to be developing another affordable vehicle, which according to Reuters, may be a compact SUV. Notably, in March, Musk hinted at “something much cooler than a minivan is on the way,” though it's uncertain if this refers to a consumer vehicle or something similar to the Cybercab.

      So, what is Tesla working on?

      “The automaker has reached out to suppliers recently to go over specifics regarding the compact SUV – which would be a brand-new model rather than an adaptation of Tesla's existing Model 3 or Y,” states the Reuters report, referencing at least four anonymous sources. The timing of this news is quite interesting. Tesla had reportedly canceled plans for an inexpensive electric vehicle not long ago, with Musk mentioning that the company intends to concentrate on its robotaxi and humanoid robot projects.

      Christian de Looper / Digital Trends

      The new vehicle will be “significantly” shorter than the Model Y, measuring about 14.04 feet long. As a reminder, compact SUVs are extremely popular, particularly in key EV markets like China, where brands such as BYD, Geely, Zeekr, and Xiaomi are heavily pursuing electric SUVs that rival Tesla's offerings in terms of design and features. Tesla is expected to begin production of this anticipated vehicle in China, but may later extend the production to plants in the US and Europe as well.

      Wait, will it be more affordable?

      According to the Reuters report, the upcoming vehicle could be priced “considerably lower than its base Model 3 sedan,” which has an entry price of $36,990 in the US for the basic RWD version. Interestingly, it may be equipped with a smaller battery to reduce costs, potentially resulting in a range of around 300 miles or possibly less. The number of motors might also be cut down to one, but crucially, it could be provided in both autonomous and human-driven versions.

      Christian de Looper / Digital Trends

      It appears the company aims to reclaim its position in the EV market as competitors like BYD and Geely continue to lower prices while making significant advancements in important areas such as charging speeds and overall range. Tesla lost its title to China's BYD as the largest car manufacturer in the world, but managed to regain it towards the end of the first quarter of 2026. Tesla seems poised to make a significant move to outshine its rivals by underpricing them.

      Nadeem is the Managing Editor at Digital Trends.

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