Tesla’s $20,000 EV Might Be a Stripped-Down Version of Its Model Y

— Tesla

Tesla’s CEO, Elon Musk, may have dropped a big hint about the company’s first affordable EV.

During Tesla’s 2024 annual shareholder meeting, Musk hinted at the potential scope for an affordable EV, saying “You could imagine if there was... say, a Model Y that cost less than $20,000, it would sell like five million units.” Musk added that the situation wasn’t possible currently, but figuring out how to make affordable vehicles would be a game changer.

It may just be another speculative statement from Musk, but it’s the latest in the saga of a rumored affordable EV from Tesla. Things came to a head when the highly-awaited Model 2 was reportedly axed, but Musk later pulled a 180 and said that the company is still committed to “more affordable models” during Tesla’s first-quarter earnings call. Even though nothing is confirmed, a $20,000 EV based on the Model Y would make a lot of sense for Tesla.

Getting to a More Attractive Price Point

Currently, the Model Y starts at $44,990 in the U.S., but there’s evidence that Tesla can go lower since it offers the same EV closer to $36,500 in China thanks to an ongoing overseas price war. On top of that, Tesla has the advantage of the Model Y earning the title of best-selling car in 2023, not just the best-selling EV. Even if a $20,000 price tag for a cheaper EV based on the Model Y means slimmer profit margins, Tesla can count on selling high quantities as a recipe for success.

To get to that $20,000 mark, Tesla will have to cut down on some of the Model Y’s features. On the software side, the company could nix autonomous driving features like Full Self Driving. On the manufacturing side, Tesla could offer a smaller battery or less powerful motors to cut down on production costs.

Musk previously said that Tesla’s upcoming affordable models would use aspects of its next-gen platform, but be produced on the “same manufacturing lines as our current vehicle lineup.” That means this potentially more affordable Model Y could be feasible since there’s no new manufacturing process to implement.

The Race For an Affordable EV

This upcoming EV could be part of the three upcoming models that Tesla teased during its shareholder meeting. While the three EVs are still under wraps, we’re expecting one of them to be the robotaxi, while another might be some kind of bus or van based on the shape we’re seeing.

“For most people, it’s not a question of whether they want a Tesla,” Musk said during the annual shareholder meeting. “They simply do not have enough money to afford one, so we have to make it affordable, that’s essential.”

It’s not just Tesla working on an affordable EV, since other automakers are racing to deliver their own to fill the void in the market. A GM exec recently claimed that the Chevrolet Bolt would be “the most affordable vehicle on the market by 2025” and Ford is working on a smaller EV platform that will likely be used for several entry-level options across its lineup. Even Nissan refreshed its more-than-decade-old Leaf for a 2025 model year. However, if Tesla gets anywhere close to a $20,000 price for its next EV, it might crush the competition and even surpass Musk’s prediction of five million units sold.