Cheapest Tesla Model Y trim now in production for release after tax credits expire

The cheaper models that Tesla has been promising for a while are finally in the pilot production and quality testing stage for a release in the October-December period.

During its quarterly results call, the CFO said that "we started the production of the lower-cost model as planned in the first half," meaning that Tesla is already building and validating its cheapest cars.

Initially referred to as the Model 2 or Model Q, Tesla's upcoming affordable vehicle was also rumored to be called the Model Z, as it will reportedly be a smaller, cheaper version of the popular Model Y crossover SUV.

In fact, Elon Musk has now directly confirmed that this cheaper vehicle is, in fact, a Model Y trim of sorts, rather than a brand-new vehicle design. While Tesla officials were beating about the bush when asked about its looks, Elon jumped in to say that "it’s just a Model Y, let the cat out of the bag there." He added that the cat will be singing and dancing, though, since it will allow people who want a Model Y but don't have enough money to buy it and take advantage of the upcoming Robotaxi platform to recoup some of that expenditure starting next year.

Chief engineer Lars Moravy confirmed that the new and more affordable Tesla models have been in quality validation production since June, and will be announced in Q4. This is when their production ramp will happen, too, since Tesla is now focused on churning out Model Y and Model 3 units that qualify for the federal tax credit before it expires on September 30, 2025.

It is interesting that Lars again refers to the "new, more affordable models" in plural. So far, the best guess is that Tesla will launch a Model Y with more basic options, but also a cheaper version of the Model 3 styled after the variant with cloth seats it already sells here and there, hence the plural.

The new cheaper Model Y could very well be lighter and more compact, just as rumored, allowing for the same range on a charge from a smaller battery. If that sounds unlike Tesla, let's not forget that it will be releasing a larger six-seat Model YL with longer wheelbase in the fall, so a smaller, cheaper trim would form a formidable trio for every taste, need, and pocket book. It may very well be called the Model YS, too, and with good reason.

As for pricing, Moravy already mentioned during the Q1 earning call that it will aim for the cheapest monthly lease possible, since that is how most of its clients in the US are shopping for cars. Currently, the Model 3 leases start from $299/month, but that is with the tax credit applied.

Tesla's head of engineering waxed poetic that it is delaying the launch of the cheaper Tesla model "just to make a car that everyone loves and wants at a more affordable price." The fact that Tesla will release the Model YS (or whatever it is called) after the tax credits expire, means that it wants to have an entrant in the affordable lease category, even in the post-subsidy era.