Not too long ago, Tesla had much of China’s new EV market to itself, but as local rivals like BYD are on their way to becoming international juggernauts, the American brand is now facing more competition than ever before. To combat this, Tesla’s Chinese division has reportedly developed a new, lower-priced version of the Model Y.

The new model, codenamed "E41," will be manufactured at Tesla's Shanghai Gigafactory and mass production is tipped to begin in 2026. The new Model Y will be smaller and at least 20% cheaper to manufacture than the refreshed version that debuted in 2023. The current car, a mid-sized SUV crossover, retails at around $36,351.