A wrapped Tesla Model Y. Photo: Christophe Gateau/dpa (Photo by Christophe Gateau/picture alliance via Getty Images)
dpa/picture alliance via Getty Images
The Tesla “Model 2” is back.
Years of “Redwood” and “Model 2” hype and rumors yielded only a stripped-down RWD Model Y (now priced at $39,990). Here are some present-day realities to keep in mind for the U.S. market in the wake of the widely-cited Reuters report of a compact Tesla SUV that would be “a new vehicle and not a variant of Tesla’s current Model 3 or Y” (which the original Model 2 rumors claimed too).
Tesla already has a certified hit – Model Y Q1 sales surge, says Cox Automotive: “The Model Y saw strongly higher sales in Q1 and the Tesla brand won back significant market share,” according to a Cox Automotive April 10 2026 report. The report went on to say: “One out of every three EVs sold in Q1 was a Tesla Model Y.”
Tesla already has a popular lower-cost vehicle: the base model $39,990 Model Y (not to mention the base $36,990 Model 3).
Tesla already has a future low-cost vehicle: the upcoming Tesla Cybercab/Robotaxi, which has a targeted price of $30,000 or less, according to CEO Elon Musk (albeit two seats and with no steering wheel nor pedals in the current iteration).
Tesla already has a potential dual-purpose design (a “human-driven option” as reported by Reuters): the Cybercab/Robotaxi could be modified to be dual purpose.
China-based BYD is often cited as a low-cost threat. But there is no history for BYD selling in the U.S. market.
“American consumers have shown that their preferred vehicles are neither small nor cheap, regardless of what their finances might suggest,” said Joseph Yoon, consumer insights analyst at Edmunds, in an email, addressing the Reuters report.
Yoon continued. “The subcompact SUV segment is popular among American consumers, but whether it’s a feasible EV segment remains to be seen, particularly if manufacturing begins overseas and the current administration holds its trade policies,” he said, adding, “Volvo has already pulled the plug on the EX30, and GM’s commitment to the [Chevy] Bolt fluctuates despite the car’s fervent customer base.”
Tesla has already gone down the low-cost “Model 2” road and has other priorities now, said Sam Fiorani, vice president of Global Vehicle Forecasting at AutoForecast Solutions. “Tesla ended development on its earlier entry-level model and the Mexican plant that was expected to produce it,” said Fiorani in an email. “As the company pivots to robotics and autonomy, the need for an entry level model in North America has been greatly reduced,” he said. “The amount of investment necessary to get profitable volumes from a low-priced model would detract from areas Tesla would rather focus on,” he said.
This article was originally published on Forbes.com
