USD 25000 ‘Tesla Model 2’ or ‘Model Q’ proposed in 6 designs

Update: ‘Model 2: A less-autonomous Robotaxi’ added and ‘Tesla Model 2 Release Date’ updated.

In June 2021, Tesla launched the Model S Plaid as the quickest (0-60 mph) series-production car that made a bold statement in the auto industry. Over the next few years, it intends to push the limits at the low end of the line-up, not in the aspect of acceleration and performance but affordability. As confirmed during the 2020 Annual Shareholder Meeting and Battery Day, Tesla will launch an electric car priced around USD 25,000 later this decade.

Here’s what has been said or reported on Tesla’s mass-market car project. This article also contains renders of the compact Tesla done by automotive designers and sleuths, all of which are unofficial.

Model 2: A less-autonomous Robotaxi?

Tesla CEO Elon Musk has confirmed that the company is set to reveal its fully driverless car, dubbed either the ‘Robotaxi’ or ‘Cybertaxi,’ on October 10, 2024. This vehicle will operate using Tesla’s Full Self-Driving (FSD) 12.5/12.6 system, handling all driving tasks autonomously.

Tesla plans to use a fleet of these hands-free taxis for its ride-hailing service. In addition, customers will have the option to lease or purchase the Robotaxi/Cybertaxi for personal use. Owners can also rent out their vehicles, similar to how properties are listed on Airbnb, with Tesla taking a share of the rental income.

The rumored Tesla Model 2 is expected to be a more conventional variant of the Robotaxi/Cybertaxi, with fewer autonomous features, making it more suitable for homologation and sale in global markets.

Codenamed Tesla Redwood

On January 24, 2025, Reuters released a report revealing ‘Redwood’ as the codename of the upcoming budget EV. Four people familiar with the development have said that the Tesla Redwood EV will enter production at Giga Texas in mid-2025, with two of them additionally claiming it will be a compact crossover.

Three of Reuters’ sources gave a more specific SOP timeline – June 2025. Later on January 24, 2024, Musk revealed during the earnings conference call that Tesla plans to start producing its upcoming EV toward the end of 2025.

One of Reuters’ sources suggested that availability will be extremely limited initially, as volume production is likely to commence in 2026. Two sources claimed that this model’s platform, internally called ‘NV9X,’ will underpin at least one more model. It’s safe to assume that they were referring to the Tesla Robotaxi.

Branding

Tesla hasn’t revealed the name of its USD 25,000 electric car, but the media refers to it as the Tesla Model 2 and sometimes even as the Tesla Model Q. However, Musk, admitted at Tesla’s 2021 annual shareholder meeting that it doesn’t plan to use the former for sure. He said:

Model 2 is not a car. There’s no Model 2.

Elon Musk, co-founder and CEO, Tesla (2021 annual shareholder meeting)

On November 14, 2022, during the second day of the B20 Summit in Indonesia, the topic of Tesla’s affordable model resurfaced. Elon Musk attended the event virtually, and the host suggested naming Tesla’s entry-level car the ‘Model I,’ with the “I” representing Indonesia and India—markets where affordable EVs are expected to gain popularity in the coming years. While Musk sidestepped the suggestion, he acknowledged that producing a more affordable Tesla is a logical move, hinting that the company should take steps toward making it a reality.

In 2018, ‘Tesla Model C’ emerged as one of the rumored names for the car positioned below the Model 3. However, until Tesla officially reveals the name of its upcoming $25,000 electric car, we’ll refer to it as the “Model 2” or “Model Q” to keep things simple and improve discoverability for search engines.

Crossover-style Tesla Model 2

On January 4, 2023, an alleged spy shot of Tesla’s rumored $25,000 EV surfaced on Chinese websites, possibly taken at Tesla Gigafactory Shanghai. Contrary to expectations of a completely new hatchback design, the camouflaged vehicle resembled a shortened, lowered, and narrower version of the Tesla Model Y, featuring a compact wheelbase.

This sighting aligns with a design sketch Tesla shared on Chinese social media following the launch of the Made-in-China Model 3 in January 2020. At that event, Elon Musk mentioned Tesla’s ambition to establish a design and engineering center in China to create an original vehicle for global markets. Following this announcement, Tesla invited design candidates to submit portfolios and soon ramped up hiring efforts in China, specifically for its Gigafactory.

Official teaser & design details

During Tesla’s Q3 2023 earnings call on October 18, 2023, Elon Musk provided insights into the company’s upcoming high-volume model, emphasizing that it would be “much more conventional” than the Cybertruck—something already anticipated given its expected affordable price point. Musk described the vehicle as “cool” but “utilitarian,” aimed primarily at commuting from point A to point B. Despite its practical nature, he assured that it would still have an attractive design, stating, “it’ll still be beautiful.”

In addition to keeping research, development, and production costs low, Tesla is focused on making the compact EV easy to manufacture. Musk noted that this model would be built in new factories in countries that have never produced Teslas or, in some cases, any advanced global EVs. To streamline production, Tesla is designing this car to be simpler and capable of being manufactured at speeds “unheard of in the auto industry.”

Earlier in 2023, on February 22, during the inauguration of Tesla’s Global Engineering Center in Palo Alto, California, the company likely teased the Model 2. In a video shown during the event, at the 11:26 mark, a covered vehicle appeared that resembled a downsized Tesla Model Y, further fueling speculation about a crossover-style Model 2.

Video Source: YouTube/Tesla

On May 16, 2023, at the 2023 Annual Shareholder Meeting, Musk teased a future model that seemed to be the Tesla compact car. The Tesla chief showed a picture of the EV’s side profile, which, just like the previous teaser, had hints of the Tesla Model Y. “We are actually designing a new product,” Musk said while showing this image. “There are two new products that I think you will be very excited about and both the design of the products and the manufacturing techniques are head and shoulders above anything else that is present in industry,” he added.

The design of both the low-cost car and the Robotaxi was previewed internally in February 2023, and they had a Cybertruck-like feel, Axios reported on September 8, 2023, based on information seen in Walter Isaacson’s ‘Elon Musk’ biography. The latter would be a smaller, fully autonomous car based on the same new platform as the upcoming entry-level model.

Musk loved the way they looked and said people would perceive them as futuristic. Starting their production from a new plant (Giga Mexico) would’ve required many of Tesla’s top engineers to move there, as the company prefers them to be located close to the assembly line, it adds.

Tesla Model 2 imagined as a supermini

Manufacturing

During Tesla’s Q3 2022 earnings conference call, Musk indicated that the targeted sales volume exceeds all of its other vehicles combined. He was talking about the anticipated production volume of the model:

It will, I think, swiftly become, like shortly exceed the production of all our other vehicles combined.

Elon Musk, co-founder and CEO, Tesla (Q3 2022 earnings conference call on October 19, 2022)

With the high level of quality that Tesla aims to offer even in its most affordable car, meeting the target price of USD 25,000 is challenging. The LFP chemistry will keep the battery cost low, but there’s more the company can do. About that, below is what Zachary Kirkhorn, CFO, Tesla, said during the Q1 2021 earnings conference call:

Obviously, building a car like a Model S is quite complex and has various moving parts. Model 3 and Model Y were steps of improvement in that. But when you look at some of the other advancements that we are including in the Model Y, factories into Austin and Berlin, we have reduced the body pound by as much as 60%. And the part costs money.

Zachary Kirkhorn, CFO, Tesla

Another way Kirkhorn suggested Tesla can meet the production cost targets is by making cars in high volumes in four factories worldwide:

U.S.

Tesla will manufacture its next-gen car at the Giga Texas plant in Austin, USA, Musk revealed during a podcast with engineering consulting firm Munro & Associates’ Sandy Munro on YouTube channel Munro Live on December 5, 2023. This will be the car’s first production site worldwide, he added.

Elon Musk clarified the decision to select the Giga Texas plant over the Giga Mexico facility as the first production site for the USD 25,000 electric car. He reasoned that constructing the factory in Mexico would take too long. Musk believes this affordable Tesla model will “blow people’s minds,” and will represent a revolution in manufacturing. He is closely involved in the project, reviewing the production line plans for this vehicle on a weekly basis.

Germany

As for Europe, the company’s Gigafactory Berlin-Brandenburg would manufacture the vehicle, as per a tweet by Gigafactory Berlin News. It claims that Elon Musk announced the development during his visit to the plant on November 3. 2023. On November 6, 2023, Reuters learned from one of its sources that the low-cost car would be made at the plant, but couldn’t get details about the start of production.

Tesla Model 2 battery & motor

Tesla Model 2 envisioned as a city runabout

New platform

On October 19, 2022, during Tesla’s Q3 2022 earnings conference call, Musk offered new hints on the entry-level Tesla. He said that the company’s future EV platform would be smaller than the one underpinning the Model 3 and Model Y and cost about half to make. The company will use everything it learned from developing the platforms underpinning the S, X, 3, Y, Cybertruck, and Semi models while making the new platform.

New drive unit

It is Tesla’s goal to significantly reduce the use of rare earth materials in the components of its cars and increase their efficiency. Tesla announced on March 1, 2023, that its next drive unit would use 75% less Silicon Carbide without compromising performance or efficiency. The company indicated that it plans to use this drive unit in the USD 25,000 model. A fully indigenous controller will be used in this car. There will be a 48-volt lithium-ion auxiliary battery that will require less current and thinner wires.

On the LFP battery

Tesla could offer the Model 2 exclusively with a new Iron-based battery, which promises long cycle life. Further, the shift from Nickel to Iron for its future entry-level cars indicates Tesla is keen on lowering the cost of the vehicle. An Iron base (which is more abundant than Nickel) would mean that Tesla would have fewer supply constraints. However, Musk indicated he had urged mining companies to produce more of the material.

With its long cycle life, the LFP battery (Lithium Iron Phosphate) would be an integral part of the new entry-level Tesla. Long cycle life is paramount for commercial applications. Since Tesla already introduced the Model 3 with LFP, it could have essential insights into this chemistry for optimization in the mass-market Model 2 when it is ready for launch.

Tesla Model 2 Range

On April 5, 2023, Tesla revealed in its Master Plan Part 3 (pdf) document that it plans to offer its upcoming compact car with a 53 kWh LFP battery pack. The company sees this EV as a standard-range vehicle that can utilize a lower energy density chemistry, being primarily used for short or medium distances in and around the city. The company already uses an LFP in mid-size EVs (Model 3 & Model Y), but with a notably higher energy storage capacity (75 kWh).

The Tesla compact EV with the 53 kWh LFP battery pack should deliver an EPA-est. range of at least 250 miles, which seems enough for an affordable and reliable daily driver. In the Model 3, the company used to offer a CATL 55 kWh LFP battery pack that delivered a range of 468 km or 291 miles (NEDC/China).

Model 2 as a C-segment hatch

Tesla expects its compact EV will record double the sales of its mid-size EVs (Model 3 and Model Y) combined – 42 million units. That seems quite an ambitious target for just one vehicle, especially for a company that sells just around a million units of all its models combined annually.

Tesla Model 2 or Tesla Model Q FAQs

Featured image: SugarDesign

An automobile engineer by training, I’ve analyzed the global car market since 2005, with a keen focus on EVs since 2008. My journey in online automotive publishing spans 16 years, during which I have reviewed cutting-edge automotive technologies and interviewed leading CEOs and vehicle developers from around the world.