The automaker has contacted suppliers in recent weeks to discuss details of the plan for the compact SUV – which would be a latest vehicle and not a variant of Tesla’s current Model 3 or Y, the individuals commented. The conversations involved the manufacturing process and specifications for various components, they mentioned.

Three of the individuals noted the compact SUV would be produced in China, and one stated 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, two of the sources noted. That’s significantly shorter than Tesla’s top-selling Model Y SUV, which is about 15.7 feet long.

The effort follows a decision by Chief Executive Elon Musk to scrap a highly anticipated low-cost EV project in 2024 and pivot the corporation to focus on robotaxis and humanoid robots. A key question is whether this latest effort to develop a smaller SUV signals a strategy shift back to mass-market human-driven EVs or whether the latest model would align more with Tesla’s vision for fully autonomous vehicles.

Such a model could potentially serve both purposes, according to one of the humans familiar with the new-vehicle project and a Tesla employee with knowledge of its current product philosophy. The Tesla employee declined to confirm or deny details of any specific vehicle but mentioned, in general, the automaker now aims to build models that would be driverless but offer a human-driven option.

While aiming for full autonomy across its lineup, the person mentioned, Tesla realizes many global markets won’t see meaningful adoption – nor regulatory acceptance – of driverless vehicles for years. Preserving the option to build a particular model with or without driving controls could enable more sales and help ensure Tesla can keep its car factories running near capacity, the person mentioned.

As Tesla chases a driverless future, some analysts predict a third-straight year of declining sales for the traditional EVs that provide the vast majority of its revenue. So far, Tesla operates a tiny number of robotaxis only in Austin, Texas, many with human safety monitors in the passenger seat.

Tesla didn’t respond to requests for comment about plans for a latest vehicle.

The four citizens familiar with the project mentioned it remained in an early development stage. Reuters couldn’t determine whether Tesla has given the green light for the car’s production.

The automaker has a history of starting development on products that end up long delayed or canceled. Tesla showed off concept vehicles for a Roadster supercar and a Semi freight truck in 2017, for instance, but still hasn’t produced the sports car or mass-produced the Semi.

Two of the sources noted Tesla aims to offer the updated vehicle at a substantially lower price than its entry-level Model 3 sedan, which starts at $34,000 in China and about $37,000 in the United States. They mentioned Tesla planned to save costs in part by using a smaller battery, which would mean a shorter driving range compared with 306 to 327 miles for the Model Y.

One of the the public added that the automaker would also offer a single electric motor instead of two, a performance option on current Tesla models. Tesla also wants to produce the car much lighter, this person noted, at about 1.5 metric tons compared with about two tons for the Model Y.

Three of the the public stated the updated model would be produced at Tesla’s Shanghai factory. While the timing remained unclear, the car’s production is unlikely to begin this year, the individuals remarked.

Tesla’s start-and-stop history on affordable EVs

For years after Tesla started in 2008 producing luxury electric cars, Musk commented the company’s real mission was to produce affordable, mass-market electric-vehicles that would be critical to fighting the climate crisis. But start-and-stop efforts to deliver on that goal have so far fallen short.

Beginning in 2020, Musk remarked Tesla aimed to divest 20 million vehicles annually by the end of the decade, nearly double that of Toyota, the current global sales leader. A project Musk touted to produce a $25,000 EV, often called the “Model 2” by Tesla fans and investors, was expected to drive explosive vehicle-sales growth.

Then in 2024, Reuters reported that Tesla had abandoned plans for the Model 2, although it still planned a driverless robotaxi on the same platform. Tesla’s biggest EV rivals in China had already started producing much cheaper EVs. Later that year, Musk noted it would be “pointless” and “silly” for Tesla to create a $25,000 EV for human drivers because the business would soon offer driverless vehicles.

A former Tesla manager noted an all-new cheaper traditional car would represent a significant departure from the company’s philosophy through mid-2025. Until then, the manager commented, Tesla had dropped the effort to mass-produce an entry-level car in favor of robotaxis as the key to lowering costs per mile for riders and the car owners charging them for trips.

After scrapping the Model 2, Musk and other Tesla executives described different plans for novel, “more affordable” EVs in vague terms. When the vehicles arrived last fall, they were stripped, on the other hand-down versions of the current Model 3 and Y offered in novel “standard” trim levels at only a modest discount. This also touches on aspects of earnings report.

U.S. prices of $36,990 for the Model 3 Standard and $39,990 for the Model Y struck some investors as too high to attract a fresh class of buyers and haven’t yet made a significant difference in Tesla’s overall sales.

Is the driverless Cybercab on track?

Publicly, Musk and Tesla have continued to emphasize plans for robotaxis and humanoid robots, which has been effective in sustaining Tesla’s eye-popping stock-market value.

Tesla’s economy capitalization is about $1.3 trillion – far outpacing its financial fundamentals, even when compared with high-flying tech peers. Investors last year approved a compensation package granting Musk up to $1 trillion in Tesla stock tied to a series of product and financial goals.

The automaker now says it plans to start production this month of a two-door Cybercab robotaxi, first unveiled as a concept vehicle in 2024, with no pedals or steering wheel. But it remains unclear when the car will go on sale or see apply in a Tesla-operated robotaxi fleet. The automaker hasn’t sought a federal exemption required to liquidate a vehicle with no steering wheel or pedals, a spokesperson for the National Highway Traffic Safety Administration remarked.