Tesla revives plan for cheaper, smaller electric SUV

Tesla is developing an all-new smaller, cheaper electric SUV, according to four people familiar with the matter who spoke to Reuters.

The automaker has contacted suppliers in recent weeks to discuss details of the plan for the compact SUV, which would be a new vehicle and not a variant of Tesla's current Model 3 or Model Y. The conversations involved the manufacturing process and specifications for various components, the sources said.

Three of the people said the compact SUV would be produced in China, and one said Tesla also aims to expand production to the United States and Europe. The car would be 4.28 meters in length, or about 14 feet, according to two of the sources. That is significantly shorter than Tesla's top-selling Model Y SUV, which is about 15.7 feet long.

The effort represents a reversal for Tesla and Chief Executive Elon Musk, who has insisted over the past few years that the company does not need to make a more affordable EV. Musk called the endeavor "pointless," citing his belief that all cars in the future will be autonomous. In 2024, Musk reportedly cancelled Tesla's plans to build a $25,000 electric car, thought to be called the Model 2, in order to focus on developing robotaxis and humanoid robots.

The decision to cancel the affordable vehicle project contradicted Musk's previous promise to build a lower-cost model. The new compact SUV project now signals a shift in that strategy, though the sources did not provide details on pricing or timeline for the vehicle's launch.