Cheaper 2025 Tesla Model Y goes into production next month

After posting one of its worst quarterly sales results, Tesla is fighting back with the announcement that it will build new cheaper variants of the 2025 Tesla Model Y.

Elon Musk revealed the trimmed-down Tesla Model Y was coming during a call with investors, but the Tesla CEO was careful to not reveal any more, including on whether it would be priced at the originally mooted $US25,000 ($A38,000) figure.

Currently, the cheapest Tesla Model Y rear-drive is priced from $58,900 plus on-roads in Australia, with plenty of rivals like the Kia EV5 ($56,770 drive-away), Geely EX5 ($40,990 drive-away), XPeng G6 ($54,800 plus on-roads), Leapmotor C10 ($45,888 plus ORCs), BYD Sealion 7 ($54,990 plus ORCs) and Deepal S07 ($53,900 plus ORCs) undercutting the world’s best-selling EV.

There’s no word on how the more affordable Model Y will take shape, but it’s thought both smaller batteries and less powerful motors will be employed that will both take their toll on range and performance.

Full details will be released soon as it’s been reported that the cut-price Model Y will enter production in either August or September, suggesting the new Tesla will be available to order soon.

Tesla hopes that a cheaper price point for the Model Y – and a more affordable take on its Model 3 sedan that will be introduced later – will help offset its heavy losses posted in the second quarter that saw income drop by 16 per cent to $US1.17 billion ($A1.78b).

Execs from the US carmaker said the 16 per cent drop in profits was attributed to slowing sales, a reduction in the average transaction price and increased costs.

Back in the US, the EV pioneer hopes the new base Model Y will help maintain its popularity if President Donald Trump rolls back the country’s emission mandates that includes a $US7500 ($A11,400) government-backed electric car grant.

Tesla’s profits have also been hit by the reduction in electric car credits it receives from other carmakers that have already dropped by 51 per cent since Q2 2024 to $US441 million ($A670m)

Credits are dwindling as Trump winds back electric car regs in the US that means some car brands no longer need to hit EV production targets, cancelling the necessity to purchase credits from Tesla.

Following a recent earnings call, CEO Elon Musk told media that Tesla “probably could have a few rough quarters; I’m not saying we will, but we could”, with the Tesla boss hinting at other issues that have seen the facelifted Model Y struggle in the Chinese market over Trump’s tariffs.

In other European markets, a drop in sales has been linked with Musk’s own political beliefs and previously close ties with Trump that has seen the number of Teslas sold in the region fall dramatically from 165,000 (first half of 2024) to 110,000 in the first six months of 2025.

Instead of banking on future all-new vehicles, Musk doubled down on his prediction that the firm’s future revenue would be linked to the carmaker’s self-driving tech that would help it launch both a robotaxi service and a fleet of driverless vehicles like the Cybercab.

“Once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I think I’d be surprised if Tesla’s economics are not very compelling,” said Musk.

One of the more outlandish claims in the call was that “half of the population of the US will be covered by Tesla’s Robotaxi by the end of the year”, despite the paid-for rides are currently only limited to select invitees who share the ride with a back-up human driver, with the service limited to a geo-fenced area in Austin, Texas.

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