Tesla is restarting development of its long-delayed “Redwood” project, which targets the company’s most affordable vehicle to date, widely referred to as the Model 2. The move comes as Tesla prepares to introduce cheaper versions of its Model Y and Model 3 in additional markets, including China, where price competition among electric carmakers continues to grow.
The Model 2 project, previously paused in favor of the Cybercab and Robotaxi platforms, is expected to deliver a compact electric vehicle priced around $25,000. Internal reports indicate the car will feature a smaller design similar to the Model Y crossover, a 54 kWh battery offering about 250 miles of range, and the company’s upcoming AI5 Full Self-Driving hardware.
Tesla’s strategy also includes launching new base trims of its Model Y and Model 3 tailored to local market demands. In China, the company plans to adjust hardware and comfort features to meet consumer expectations while maintaining affordability. These entry-level versions are expected to roll out next year.
The company had previously introduced a stripped-down Model Y Standard in the United States by removing more than 20 features to reach a sub-$40,000 price point. However, Tesla may opt for different specifications in China, where domestic competitors such as BYD have introduced strong alternatives at lower prices.
Analysts expect Tesla to launch the Model 2 by late 2026, coinciding with the broader installation of its next-generation FSD computer systems. The vehicle is projected to serve as Tesla’s first true mass-market EV, with production goals reportedly reaching up to four million units.
Source: 36kr