Tesla (NASDAQ:TSLA) shares moved slightly higher in premarket trading following a Reuters report that the company is working on a new compact electric SUV expected to be smaller and more affordable than models currently in its lineup. The vehicle could signal a renewed push toward the mass-market segment for the Austin-based EV maker.
According to Reuters, Tesla has recently reached out to suppliers to discuss production methods and component requirements for the proposed model. The vehicle is reportedly being designed as a completely new product rather than a modified version of the Model 3 or Model Y.
Sources cited by the report said the new model is planned for production at Tesla’s Shanghai facility. One of the sources added that the company also intends to expand manufacturing to plants in the United States and Europe.
The compact SUV is expected to measure around 4.28 meters in length, notably shorter than the Model Y, which is roughly 4.79 meters long. It would also carry a price tag significantly below Tesla’s entry-level Model 3, which currently starts at about $37,000 in the U.S.
Cost reductions are expected to come in part from a smaller battery pack, a single electric motor, and a lighter vehicle weight of about 1.5 metric tons compared with roughly two tons for the Model Y.
The project is still in its early stages, and production is not expected to begin this year. It is also unclear whether Tesla has formally approved the vehicle for full-scale production.
Tesla CEO Elon Musk had previously canceled a widely anticipated low-cost EV program in 2024 as the company shifted its focus toward robotaxis and humanoid robotics.