Tesla has informed its suppliers of plans to start producing a new mass-market EV, codenamed "Redwood," by mid-2025. Reuters broke the news less than 24 hours before Tesla’s call with shareholders. The media outlet used information from four sources “familiar with the matter,” with two describing the model as a compact crossover.
This can only be the $25,000 car, also known as the Model 2 or Next Gen. It’s not the first time that we’ve heard rumors of it being a smaller Model Y. The next-generation Tesla architecture, internally known as 'NV9X', is said to include at least two models. Tesla’s Master Plan suggested that there would be infinite demand for the less expensive car, projecting its fleet could match all of the other models combined.
Next Model in 2025
Tesla has approached suppliers requesting quotes for the "Redwood" model, forecasting a weekly production volume of 10,000 vehicles. Production is slated to begin in June 2025, according to three sources who spoke anonymously due to the confidential nature of the information. However, the fourth downplayed the timeline, stating that most of Tesla's new product launches have been overly optimistic, with volume output more likely to start in 2026.
Sources also revealed that Tesla has recently dismantled a Honda Civic, priced at $23,950 in the U.S., to study methods of producing more affordable cars.
Concept of Next Gen
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One of the most upvoted queries from investors, ahead of Tesla's fourth quarter and year-end report, concerned the timing of the next-gen compact vehicles, and for good reason. Tesla fell behind BYD as the world’s leading EV producer in the last quarter of 2023. Add that to the new push to gas-powered cars thanks to a refreshed attack on EVs since the Big 3’s labor strife. Tesla must put its shareholders at ease addressing these factors head-on, precisely what a mass market, less expensive vehicle would do.
The Long History of the Cheaper Tesla
Musk initially promised a $25,000 car in 2020, a plan he later paused and reinstated. Tesla's most budget-friendly model, the Model 3 sedan, currently has a starting price of $38,990 in the United States. In the previous year, Musk commented on the sensitivity of high-ticket items, such as cars, to rising interest rates among consumers. In May, Musk revealed that Tesla was developing two new products, potentially unveiled within the year, with a combined annual sales potential of 5 million vehicles.
During Tesla's shareholders meeting, he emphasized, "Both the design of the products and manufacturing techniques are head and shoulders above anything else that is present in this industry." Walter Isaacson's biography of Musk hints at the more affordable car and the Robotaxi based on the same vehicle architecture. There was even a picture that gave away several clues.
Picture from Elon Musk Biography
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Last March, Musk and other Tesla executives outlined plans to halve the cost of their next-generation vehicles, although a specific timeframe for these launches was not provided. About a year ago, chief designer Franz von Holzhausen said that the car he is most excited about is the one he is currently working on but could not talk about.
Musk stated last year that the affordable model would initially be manufactured at Tesla's factory in Texas. Additionally, Tesla plans to manufacture more affordable cars at its plant near Berlin and has expressed interest in establishing a factory in India to produce smaller, cheaper electric cars.
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According to a new report from Business Insider, Tesla is planning a week-long production pause for the Cybertruck and Model Y lines at Giga Texas. On the surface, the reason seems pretty straightforward: maintenance and line upgrades.
But Tesla has been infamous for never shutting down lines unless it's an absolute production necessity. Given that this is the third production pause in the last 12 months, this suggests that Tesla is planning something other than routine maintenance.
Official Story
The facts, as reported by BI, are fairly straightforward. Tesla will be shutting down the Model Y and Cybertruck lines from June 30th to July 4th. In a staff meeting at Giga Texas, Tesla stated that the pause would enable maintenance and upgrades to help ramp up production.
While this could seem odd for the recently updated Model Y and Cybertruck lines, it also makes sense as Tesla continuously makes production improvements, rather than waiting for model year updates.
There definitely feels like there’s more to this story than a simple pause, but the timing and context suggest this pause is far more significant.
The Affordable Model
The key to this shutdown is Tesla’s strategy for its more affordable model. Tesla has pivoted away from building Giga Mexico, and is instead planning to build both the Cybercab with its unboxed assembly process, as well as the next-gen affordable vehicle at Giga Texas.
For now, Tesla plans to build the affordable model based on existing production lines within Giga Texas, rather than build a standalone line. This is mostly because Tesla intends for the affordable model to have a high part familiarity with the Model 3 and Model Y.
The Model Y line, in particular, is the prime candidate for this retooling. It is Tesla's most refined high-volume production line, and the tooling and equipment on the line are perfectly suited to enable Tesla’s quick transition to producing the new model.
A week-long shutdown is not enough time for a complete overhaul, but it is the perfect window to begin preparatory work. This could include installing new mounting points for future robotics, rerouting utilities, or even running initial trials for new assembly processes in a portion of the line.
Timing is Everything
This theory makes even more sense in the context of recent events. The cheaper model was initially planned for the first half of 2025, but following reported delays, the timing seems right for Tesla to start incorporating changes to support the new vehicle. While Tesla initially planned for a cheaper model to be based on the Cybercab with its unboxed assembly, they decided to produce one based on the current assembly line to get to market sooner. This isn’t the cheaper, “$25k” vehicle we were all hoping for, but instead a more affordable version of the Model 3 or Model Y.
While the Cybertruck line is likely undergoing standard ramp-up tweaks, the shutdown of the Model Y line likely presents something more. While it could also include maintenance and incorporate updated tools, it may include changes required for the newer model.
More Than Maintenance
While the official reason reported by Business Insider seems fairly plausible, there’s always more under the surface when it comes to major decisions like this with Tesla. Using the planned maintenance window to quietly begin the process of retooling is the kind of move we expect from Tesla.
Just days before Tesla’s planned launch of the Robotaxi network in Austin, a group of local lawmakers has sent a letter to Tesla, urging them to delay the launch. Citing a new state law set to take effect on September 1st, the letter asks Tesla to pause its launch until it can formally comply with the new framework.
On the surface, this could sound like a significant roadblock. However, upon closer examination of the lawmaker’s concerns, the requirements of the new law, and the upcoming unified federal autonomy regulations, the request may be more political theater than a genuine obstacle.
In fact, Tesla’s Robotaxi service appears to already meet the spirit—and likely the letter—of the upcoming regulatory framework.
The Letter and the Law
The letter, penned by State Senator Sarah Eckhardt, formally requests that Tesla postpone its planned Robotaxi launch this month until the new and more comprehensive autonomous vehicle law is in effect on September 1st. It's important to note that this isn’t a legal injunction; it doesn’t have any power, and Tesla is under no obligation to comply or even reply. The letter is a formal request, a piece of political pressure intended to encourage proactive compliance.
So, what does this new law demand? It has five key requirements for autonomous vehicle operation in Texas.
Barely A Speed Bump
A detailed look reveals that Tesla's existing technology and practices likely already meet every single requirement of the upcoming regulations, so let’s dive in.
1) Capable of operating in compliance with state traffic laws.
This is the fundamental purpose of FSD - complying with traffic laws to get a passenger from Point A to Point B. The system is designed to adhere to traffic laws, and in fact, sometimes sticks to them too closely (like the NHTSA stop).
2) Equipped with a recording device.
This is probably the easiest requirement when you look at a Tesla. Every vehicle is a rolling 360-degree security suite, equipped with multiple cameras and internal sensors that document every action taken by the vehicle.
3) Compliant with federal law, including federal motor vehicle safety standards.
Tesla is currently deploying Model Ys for its Robotaxi network pilot, which means that they are fully compliant with FMVSS standards. This will likely change once Cybercab begins to deploy, but the NHTSA is working on accelerating federal regulation for vehicles without driver controls in the near future.
4) Capable of achieving a “minimal risk condition” if the automated system is rendered inoperable.
When the system detects a critical fault or issue it cannot handle, it must slow down, activate hazard lights, and pull over to a safe location at the side of the road. That is very doable, and likely within Tesla’s calculations for how they will handle system aborts and other incidents. In fact, the Model Y robotaxis with a safety driver in the passenger seat have been spotted with buttons on the screen that say “Emergency Stop” and “Pullover.”
5) Registered, Titled, and Insured under Texas law.
This is a bog-standard requirement. Every vehicle operator must meet those three requirements, and as Tesla’s Model Ys currently driving the roads in Austin are sporting manufacturer plates, this is likely already done.
While these Texas lawmakers are asking for a pause, the NHTSA is actively working to make it easier for companies like Tesla to deploy autonomous vehicles. This state-level scrutiny, while perhaps well-intentioned, is a clear example of the challenge of deploying a national network under fragmented regulations.
Ultimately, this letter is unlikely to be anything more than a political statement. It will be logged and acknowledged, but it presents no new technical or legal hurdles for Tesla to clear before its planned launch. For an autonomous future, this isn't even a bump in the road.
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