To cope with the price war in China, Tesla is also planning a low - cost "Model Y" | Exclusive from 36Kr

Text | Xu Caiyu; Editor | Li Qin, Yang Xuan

Tesla, which has seen a decline in both sales and stock price, has a backup plan in China.

36Kr learned from industry sources that to cope with the fierce market competition, Tesla's China team has led the development of a new model.

People familiar with the matter told 36Kr that the new model is a "lower - priced Model Y". Compared with the currently sold Model Y, there are basically no major changes in parts such as the battery, power system, and chassis of the new car.

"It is developed through the depop method," revealed the person familiar with the matter. Depop is an internal development concept at Tesla, which means to quickly launch products by simplifying configurations while keeping the main functions unchanged.

Before the low - priced "Model Y", Tesla launched a stripped - down and low - priced version of the "Model 3" in Mexico last August. In comparison, "the former is more led by the China team, while the latter is more led by the headquarters."

People familiar with the matter said that the project code for the new car no longer uses an English name, but instead uses a combination of letters and numbers.

The launch time of these new models will depend on the order performance of the refreshed Model Y. If the refreshed Model Y fails to meet expectations, Tesla is expected to launch this "cheaper Model Y" in the second half of this year.

36Kr verified the above information with Tesla. As of press time, there has been no response.

36Kr previously reported that from the start of pre - orders on January 10th to the start of deliveries on February 26th, Tesla's refreshed Model Y received 200,000 orders, including "refundable deposit" orders.

In the first week after the start of deliveries, more than 6,000 units of the refreshed Model Y were delivered. In the past, this number was usually 10,000 or more. The refreshed Model Y is obviously still in the production ramp - up period.

Currently, Tesla's official website shows that the delivery cycle for the rear - wheel drive standard - range version of the refreshed Model Y is 2 - 4 weeks, and that for the long - range version is 6 - 10 weeks. Compared with the previous regular delivery cycle of 1 - 4 weeks, the order volume of the refreshed Model Y has not significantly exceeded Tesla's production capacity and expectations.

As production capacity and delivery have not kept up, but the waiting period for new car orders is not long, the market response to Tesla's refreshed Model Y is not optimistic.

During the Model Y replacement period, in February 2025, Tesla's total sales in China plummeted by 49%, the worst performance since July 2022. One model holds the "life - and - death power" of Tesla, so the refreshed Model Y can only succeed, not fail.

To avoid being in a passive position, the "lower - priced Model Y" is a bullet reserved by Tesla China.

Behind the new car, Tesla must regain the Chinese market

The decline in sales is the most severe test Tesla is currently facing.

In February 2025, Tesla China achieved its lowest sales volume in the past two years: the total sales volume was 30,688 units, a year - on - year plunge of 49%. Specifically for models, 8,006 units of the Model Y were sold, with a year - on - year decline of up to 77%.

The decline in sales in the Chinese market is not an exception.

In January 2025, Tesla's sales in the European market decreased by 45%. Specifically in regions, in Germany, where Tesla's European factory is located, from January to February this year, Tesla's total deliveries in Germany were only 2,706 units, a year - on - year decline of 70.6%. In its home market in the United States, Tesla's sales have been declining for four consecutive months.

The weak global sales have directly led to a sharp drop in Tesla's stock price. In Monday's U.S. stock trading, Tesla's stock price fell by 15%, the largest single - day decline since September 2020.

In the European and North American markets where the penetration rate of electric vehicles is relatively low, consumers' resistance to Tesla stems from the recent close connection and related actions of founder Elon Musk with the Trump administration. It is obviously not easy to reverse the judgment of European and North American consumers on Tesla.

However, the reason for the decline in sales in the Chinese market is very simple and direct: although there is a transition period during the replacement of the old and new Model Y, the most direct reason for the decline in its sales is that Tesla's product competitiveness is declining.

From December 2024 to February 2025, the sales volume of Xiaomi SU7 exceeded that of the Model 3 for three consecutive months, becoming the champion in the pure - electric sedan market.

The threat faced by the star model Model Y is also becoming more real: the cumulative orders of the Zhijie R7 under Huawei's Hongmeng Zhixing have exceeded 80,000 units five months after its launch; three models similar to the Model Y in terms of pricing and positioning, namely the Xiaomi YU7, XPeng G7, and Li Auto i7, will all be launched in the market in 2025.

Fortunately, Tesla is facing a predictable path. Improving product strength or reducing prices may both become new breakthroughs for the Model Y.

China is Tesla's largest global market, and it is a relatively mature electric vehicle market. Automobile companies and consumers care more about real - world battery range, configurations, and intelligence. As one of the earliest companies to sell pure - electric vehicles in China, Tesla also has a unique brand appeal and mass base in China.

This is the most friendly market for Tesla and also the most likely lifesaver for Tesla. The lower - priced "Model Y" is a "silver bullet" for Tesla to regain the Chinese market.

Can this lower - priced Model Y succeed?

When Tesla first entered China, it was synonymous with environmental protection, innovation, and intelligent vehicles. However, domestic self - owned brands have developed rapidly. In just a few years, intelligent voice experience and large AI models have been rapidly deployed in cars, and intelligent driving has gradually become an important consideration for consumers when purchasing cars.

However, Tesla's "intelligent" performance has not made a leap - forward progress.

While domestic automobile companies' intelligent voice functions support dialect input, continuous command input, and input without a wake - up word, Tesla still relies on specified voice commands for wake - up, and its localization process of intelligent voice lags behind that of domestic automobile companies.

In terms of intelligent driving, which consumers care more about, Tesla's FSD can only be used in China at the beginning of 2025. Moreover, the performance of Tesla's FSD in China also fails to meet consumers' expectations. It is not familiar with the local road conditions in China, and Tesla's official sales staff will also advise consumers to use it with caution.

Meanwhile, the intelligent driving of domestic automobile companies has extended to full - scenario applications and can even perform high - difficulty tasks such as overtaking and cutting in, and autonomously driving out of the basement to pick up people on the ground.

Tesla's image has changed from a "pioneer" to a "conservative". Stable product and price performance, and excellent electronic control capabilities have become Tesla's advantageous labels.

According to 36Kr, the lower - priced model led by Tesla's China team is based on the Model Y/3 in terms of components such as power, battery, and chassis.

Tesla has already launched such a model in the Mexican market.

Compared with the previous model, the interior ambient lighting of the stripped - down version has become monochromatic, the seats have been changed from full - leather to half - leather and half - fabric, the rear entertainment screen has been removed, and the heating functions of the front and rear seats and the steering wheel have been cancelled. The price of the stripped - down version has been reduced by $4,000 (approximately 28,600 yuan) compared with the previous model.

The Chinese market may follow the same idea and launch a more minimalist model. However, these changes do not conform to the consumption aesthetics of the Chinese market.

Under the offensive of domestic automobile companies with features like in - car refrigerators, large - screen TVs, and comfortable seats, Tesla's "minimalist design" has been criticized by many consumers.

While domestic automobile companies offer low prices and high - end configurations, Tesla, like a "bare - shell house", will continue to reduce configurations. Obviously, the card Tesla wants to play is the price card.

In the Chinese market, Tesla has once tasted the benefits of price. In the second half of 2024, Tesla implemented a zero - interest policy for car loans for several months. Taking a 100,000 - yuan car loan with an interest rate of 2.99% as an example, Tesla's interest - free policy can save consumers 15,000 yuan in interest fees.

The real savings have helped Tesla receive a considerable number of orders, and the Model Y has once again become the sales champion.

However, since the end of 2024, domestic brands have also successively launched interest - free loan policies. XPeng Motors has even launched an activity with zero down payment and zero interest. The preferential dividend of Tesla's car loans is gradually disappearing.

After the launch of this "lower - priced Model Y", it is very likely to attract some potential consumers. However, domestic automobile companies not only have a fast self - iteration speed but also have a more flexible supply chain. It is not easy for Tesla to maintain such price competitiveness.

The "lower - priced Model Y" can only solve the problem temporarily, and Tesla's deeper - seated problems have not been solved.

Tesla currently only has four models on sale in China, namely the Model 3/Y in the 200,000 - 300,000 - yuan range and the Model S/X priced above 600,000 yuan. In the future, two more lower - priced Model 3/Y models may be added.

At the beginning of 2025, Tesla's FSD began to enter China. Car owners in China can experience nearly full - scenario intelligent driving, such as entering and exiting ramps, making U - turns, and passing through traffic lights.

36Kr previously reported that one of the core goals of Tesla's China team in 2025 is to introduce the Cybertruck.

Tesla's new offensive in China includes intelligent driving, low prices, and the cross - era innovative product, the Cybertruck.

However, there is still much room for improvement in FSD. In media evaluations and actual experiences of car owners, problems such as running red lights still occur. Tesla still needs to make efforts to tune an intelligent driving system suitable for the Chinese market.

As for the Cybertruck, it is more like a spiritual totem. Pickup trucks are very popular in the United States, but Chinese consumers are not interested in them. The goal of the Cybertruck is not to achieve high sales volume but to revive consumers' "pioneer" impression of Tesla.

Obviously, Tesla's mainstays are still the Model 3 and Model Y.

Now, domestic automobile companies have gradually emerged from the exploration stage and entered the stage of steady development: the Xiaomi SU7 has led Chinese consumers into a new trend of automobile aesthetics, BYD has introduced intelligent driving into products priced below 100,000 yuan, and brands such as Li Auto and Wenjie are making breakthroughs and seizing new technological dominance.

As for Tesla's Model 3 and Model Y, one has been on the market for 9 years and the other for 5 years. During this period, several minor and major facelifts have mainly focused on slight changes in battery range, chassis experience, and appearance.

Of course, the brand power and appeal of the new Model Y should not be underestimated.

Industry insiders told 36Kr that after the launch of the refreshed Model Y, the senior management of LeDao compared the two cars in detail with Li Bin, saying that the LeDao L60 has comprehensive advantages. However, judging from the order situation of the two cars, domestic new - energy vehicle companies still cannot be blindly optimistic.

Tesla is still one of the world's best - selling pure - electric vehicle brands. However, it is difficult to maintain growth with only a single advantage, and Tesla has been forced to be involved in this cruel competition.