Cheapest Tesla may be priced at less than $299/month but won't dazzle with design

The long-rumored cheapest Tesla Model 2 could just be a tiny Model Y or a Model 3 with cloth seats, according to Tesla's last earnings call. Both Elon Musk and Tesla's lead engineer Lars Moravy confirmed that cheaper Tesla models are not only in the R&D pipeline, but actually last minute kinks are being ironed out so that they can be released later this year.

According to Vaibhav Taneja, Tesla current CFO, "our operating expenses continue to increase sequentially, primarily due to our AI-related initiatives, including Optimus, and also cost of development for our vehicle programs, including Cybercabs, SEMA, and cheaper models." The plural he used when referring to Tesla's upcoming cheapest cars indicates that there might be some truth to the rumor that it will release much more affordable versions of the Model Y and Model 3, after it did the same with the RWD Cybertruck earlier this month.

The original Model 2 was expected to be a shrunken version of the Model Y, so that part of the original plan might still be executed. What looked like a diminutive take on the SUV was spotted camouflaged during a Giga Texas drone overflight not long ago indeed. What Tesla did to release the cheapest Cybertruck to date would also be instructive in how it would equip the more affordable Model Y and Model 3 versions.

By now, cloth seats seem to be the standard approach for Tesla to cut manufacturing costs, but also removing other design bells and whistles like light bars or fancy wheel sets. For the RWD Cybertruck Tesla also nixed the air suspension and automatic truck bed tonneau cover. All the things it took out are barely worth the $10,000 price difference, though, so hopefully its cost-cutting intentions for the cheaper Model Y will be more generous.

What Tesla will try to achieve with the upcoming affordable versions that "will resemble, in form and shape, the cars we currently make," is reach the lowest monthly cost of ownership. "We think our strategy of providing the best product at a competitive price is going to be a winner, and this is the reason we're still focused on bringing cheaper models to market soon," remarked the CFO.

"Monthly payment is the biggest differentiator for our vehicles," added Moravy, noting that Tesla is now focused on releasing models with "new lowest price to the market," a strong indication that the cheapest Tesla cars are yet to come in 2025.

Currently, the cheapest Tesla car lease starts from $299/month, so it could be aiming for something below that mark for its future cheapest car. The tradeoff is that "flexibility of what we can do within the form factor and the design of it is really limited to what we can do in our existing lines rather than build new ones," cautions Tesla's chief engineer.

Get the 80A Tesla Gen 2 Wall Connector with 24' cable on Amazon