Tesla Developing New Compact Cheaper EV After Model 2 Scrap
Cover image from arstechnica.com, which was analyzed for this article
Tesla is working on a compact, affordable electric vehicle following the earlier cancellation of the Model 2 project. Sources indicate the company aims to revive plans for a budget-friendly EV to expand its market reach. This comes amid shifting EV strategies and competition in the sector.
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Thursday, April 9, 2026 — Tech
Tesla has resumed work on a compact, lower-cost electric SUV that could retail well below current models and incorporate both autonomous and conventional driving options to fit varying global regulations. The project remains unapproved and early-stage, continuing a long pattern of announced affordable-EV initiatives that have repeatedly shifted or narrowed in scope. Readers should weigh the detailed specifications and sales context against the company's history of delays and its overriding public focus on robotics over traditional car manufacturing.
What outlets missed
Most coverage omitted the precise engineering targets that distinguish this project: a 1.5-ton curb weight, single-motor layout and explicit positioning as an all-new SUV rather than a stripped variant. These details, drawn from Reuters' four sources, illustrate a deliberate attempt to counter low-cost Chinese EVs while preserving flexibility for autonomy. Outlets also underplayed the strategic nuance that the vehicle could be built with or without driver controls to address uneven global regulatory timelines, maximizing factory utilization across markets unprepared for full robotaxis. Year-over-year delivery growth of 6 percent in Q1 2026 received scant attention amid broader narratives of 'collapsing sales,' even as analysts still forecast annual declines. Finally, Musk's direct 2024 denial of the original Model 2 cancellation report was rarely placed alongside the new anonymous sourcing, which relies on the same methodology that drew his earlier rebuke.
Affordable Teslas have remained a distant promise for over a decade. As traditional EV sales stagnate and cheaper rivals from China proliferate, the company is once more exploring a smaller, lower-cost electric vehicle. Four people familiar with the plans told Reuters that Tesla has contacted suppliers in recent weeks to discuss a new compact SUV distinct from the Model 3 or Model Y. The project sits in early development. Production approval has not yet been granted.
The vehicle would measure 4.28 meters long, weigh roughly 1.5 metric tons, use a single electric motor and a smaller battery pack, and target a price substantially below the Model 3, which starts at $34,000 in China and about $37,000 in the United States. Range would fall short of the Model Y's 306 to 327 miles. Initial output would occur at the Shanghai factory, with later expansion possible in the United States and Europe. These details come directly from the Reuters sources; Tesla declined to comment.