Competition for Chevrolet Equinox and Hyundai Ioniq 5: Tesla apparently plans a small, affordable electric SUV

Tesla is reportedly planning a new, small and affordable electric SUV. According to a Reuters report, the manufacturer is working on a standalone model rather than simply a stripped-down version of the Model 3 or Model Y. Tesla is also said to have discussed specifications, components and production processes with suppliers in recent weeks.

According to Reuters, the project is still at an early stage. The vehicle is expected to be around 4.28 meters (14 feet) long, making it roughly half a meter shorter than the Model Y. A smaller battery, reduced range, a single motor and lower weight are all expected to help cut production costs. According to two Reuters sources, the price could fall well below the entry-level Model 3, which starts at around 40,000 euros in Germany and 37,000 US dollars in the US.

Such a Tesla would most likely compete in the compact to mid-size electric crossover segment. In Europe, likely rivals include the Skoda Elroq, the VW ID.4 and ID.5, and the BMW iX1. In the US, a smaller Tesla SUV would more likely compete with models such as the Chevrolet Equinox EV, the Hyundai Ioniq 5 and the Kia EV6.

Possible shift in strategy

Tesla abandoned its long-anticipated low-cost entry model, often referred to as the Model 2, in 2024. Instead, Elon Musk shifted the company’s focus toward robotaxis and humanoid robots. The renewed discussion of a more traditional volume model therefore appears to signal a course correction. Given the slowing EV market and increasing competition, especially from China, a return to a more affordable mainstream model seems entirely plausible.