Tesla plans to introduce a more affordable version of the Model Y, reported Bloomberg, citing people familiar with the matter. 

The potential launch comes as the company moves to offset the loss of US federal incentives for electric vehicles. 

Sources said the new entry-level Model Y is the vehicle the company hinted at in social media posts over the weekend.  

The cheaper variant will drop some features and use less expensive materials to help counterbalance the end of the federal tax credit of up to $7,500 that ceased this month. 

Executives indicated on the company’s latest earnings call that production of the lower-cost model began in June, but the decision was taken to delay scaling up output until after the US phased out the incentives.  

Chief financial officer Vaibhav Taneja and Lars Moravy, vice president of vehicle engineering, offered few specifics at the time, before Elon Musk clarified the model in question. 

“It’s the Model Y,” Musk said, adding that he would “let the cat out of the bag”.  

He continued: “The desire to buy the car is very high, it’s just people don’t have enough money in their bank account to buy it. So, the more affordable we can make the car, the better.” 

The company reduced costs on the Model Y partly by concentrating on the battery pack and motor, the sources said. 

Last week, Tesla reported global deliveries of 497,099 vehicles for the July to September period, a quarterly record.  

Tesla does not provide regional breakdowns, but with Europe and China weaker this year, the increase likely reflected stronger US demand. 

While the expiry of the tax credits lifted sales ahead of the deadline, the pull-forward could weigh on electric vehicle demand in the coming months.  

Musk cautioned in July that the company could face “a few rough quarters” after US incentives end. 

Tesla also reported third-quarter production of 447,450 vehicles, down 4.8% from a year earlier (Q3 2024: 469,796).