For nearly a decade, it has been the holy grail for Tesla fans and the key to its mainstream future: a truly affordable electric car for the masses. After years of promises, delays, and speculation, the company confirmed on Wednesday that the long-awaited cheaper Tesla is finally moving from myth to reality.
In its Q2 2025 earnings release, Tesla stated, “We continue to expand our vehicle offering, including first builds of a more affordable model in June, with volume production planned for the second half of 2025.” This is the most concrete evidence to date that what many have dubbed the “Model 2” is in production. The confirmation sent a ripple of excitement through the market, suggesting Tesla is finally making good on a promise that dates back to Elon Musk’s original “Master Plan,” written in 2006.
The so-called ‘Model 2’ has long been rumored as a smaller, mass-market vehicle for customers priced out of Tesla’s current lineup. Speculation—never confirmed by Tesla—pegs its price at around $25,000, compared to the Model 3, the company’s cheapest car, which starts at $42,500.
However, the excitement was quickly tempered by the complex reality of Tesla’s current business challenges. During the company’s earnings call, CFO Vaibhav Taneja revealed that the rollout will be slower than initially hoped. The reason? A strategic choice to prioritize a last-minute sales blitz of its more expensive models before the $7,500 federal EV tax credit expires on September 30th.
“We started the production of the lower-cost model as planned in the first half of 2025,” Taneja told analysts. “However, given our focus on building and delivering as many vehicles as possible in reverse, before the EV credit expires and the additional complexity of ramping a new product, the ramp will happen next quarter slower than initially expected.”
Elon Musk provided a slightly more optimistic, if still distant, timeline, telling analysts, “We’ll be running with the more affordable models available for everyone in Q4.” He also sought to reassure investors that affordability would not come at the expense of profitability.
“The goal with those products was not to negatively impact revenue or gross margin, but just to make a car that everyone loves and wants at a more affordable price,” Musk said.
Many Tesla fans were disappointed and quickly voiced their frustration on X, Musk’s social platform. “I don’t understand why they are delaying it. Could they not initially sell it in other countries. Then it would show people in the US they can get a better car in Q3 for the same/better price as the cheaper car in Q4,” one user said.
I don’t understand why they are delaying it. Could they not initially sell it in other countries. Then it would show people in the US they can get a better car in Q3 for the same/better price as the cheaper car in Q4.
— Craig Mouser (@mouser58907) July 24, 2025
For a long time, Tesla’s enormous market capitalization was based in part on the fact that the carmaker would produce a car that millions of people could afford. Last year, Musk suggested that Tesla had shelved its plans for an affordable model.
The Stakes
The arrival of a cheaper Tesla could be a game-changer, unlocking a vast new market of buyers who have been priced out of the EV revolution. A successful launch could help Tesla combat slowing sales and increasing competition from Chinese automakers who have flooded the market with low-cost EVs.
But major questions remain. While the company has not revealed official pricing or specifications, Musk offered a clue about the car’s identity during the call, seemingly putting an end to years of ‘Model 2’ speculation. When asked about the new model, Musk quipped, “It’s just a Model Y. Let the cat out of the bag there.”
This suggests the affordable car will be a simplified or stripped-down version of its best-selling SUV, rather than an entirely new vehicle built on a different platform. It’s a more affordable take on the company’s best-seller. “I bet it uses the same body with scaled back features,” said Gene Munster, analyst at Deep Water Management. “This is just like Apple does with the iPhone. But if it really looks just like the Y, it will cannibalize the Y. I have to think more about that trade off.”
Musk says the new affordable model will “look just like the Model Y.”
My take: I bet it uses the same body with scaled back features. This is just like Apple does with the iPhone. But if it really looks just like the Y, it will cannibalize the Y. I have to think more about that…
— Gene Munster (@munster_gene) July 23, 2025
Still, the “slower ramp” means that by the time this cheaper Model Y is available in significant numbers, the federal tax credit that could have made it even more affordable will be long gone.
For Tesla, the stakes are enormous. Delivering a successful, profitable, mass-market vehicle would fulfill a core part of its founding mission. But after years of waiting, the company must now prove it can execute on its most important promise yet, all while navigating a more challenging and competitive landscape than ever before.
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