A new video emerging from China has provided what appears to be the first real-world look at Tesla’s highly anticipated affordable variant of the Model Y. This vehicle, codenamed E41, appears to be a heavily modified and cost-reduced version of the Model Y, aligning with previous reports from China and lining up with Elon’s announcement at the Q2 2025 Earnings Call that the upcoming vehicle would be “just a Model Y.”
This sighting is significant because it suggests Tesla’s current path to a lower price point is not an all-new, smaller vehicle, but a stripped-down version of its current best-seller.
A Look at the Changes
The video reveals a long list of changes, all seemingly aimed at reducing production cost and complexity. The differences from the current Model Y are substantial, covering both the exterior and interior.
Exterior Changes
Up front, Tesla has changed the entire front fascia and headlight assembly. From what we can see, they have moved the headlight assembly upwards and removed the horizontal front light bar of the refreshed Model Y. This means the front fascia will likely be similar in appearance to the original Model Y, in terms of lighting and the lightbar area may just be covered up in a colored trim piece. There is still a bumper camera, so that change made it over to this variant. Based on this, and statements Tesla has made in the past, we don’t expect any changes to FSD/Autopilot hardware. This vehicle will be just as capable of FSD as any other new Tesla.
Moving to the top of the vehicle, there is no all-glass roof. It has been replaced by a solid, body-colored roof panel. This is a first for Tesla, which has included a glass roof even on its cheapest models—and one that has been proven to be significantly stronger than conventional vehicle roofs. We’ll have to wait and see crash test reports of this new variant to find out just how durable the new roof is.
In the rear, the distinctive reflective light bar has been removed and likely replaced with a more conventional single brake light. The reflective portion of the tailgate has been simplified to be part of the regular body panel. No afterburner-style reflection for this more affordable vehicle.
From what we can tell, the wheelbase appears to be roughly the same as the current Model Y, so expect this vehicle to have the same amount of legroom and cargo room as the regular Model Y.
Interior Changes
Not a Tesla App
The interior has had some significant changes as well. There has been drastic feature simplification. Some features, such as the seats, are covered up, so expect some changes there as well.
There is no rear infotainment screen, and the number of speakers in the vehicle has been reduced; this version does not feature A-pillar speakers. The seat bolsters that were peaking out were finished in textile instead of vegan leather, similar to the Mexican variant of the Model 3.
In terms of storage, there are no coat hooks, and the rear parcel shelf appears to be missing from the version spotted in China. The center console has also been redesigned - the phone chargers have been moved below the screen, and the console is no longer connected, with a gap between the seats similar to the Cybertruck.
Changes Summarized
Here’s a convenient table that summarizes all the major features of the new Model Y and whether we expect them to make it to their more affordable trim. Some of them are essentially confirmed through photos of the leak, while others, marked with an asterisk, are speculated to be missing based on their cost and ease of removal.
Feature
Model Y
E41 Y
Interior
Seating Type
Vegan Leather
Textile
Headliner/Trim
Textile/Alcantara
Textile/Plastic*
Ventilated Seats
Yes
No*
Heated Seats
Yes
No*
Heated Steering Wheel
Yes
No*
Ambient Lighting
Yes, RGB
White only
Rear Touchscreen
Yes
No
Speakers
15+1
10+1*
Center Console
One-Piece
Two-Piece
Coat Hooks
Yes
No
Power Reclining Rear Seats
Yes
No*
Oscillating front vent
Yes
No*
Turn Signal Stalk
Yes
Yes
Exterior
Optional Tow Hitch
Yes
No*
Metallic Reflective Glass
Yes
No*
Acoustic Glass
Yes
No*
Bumper Camera
Yes
Yes
Front Lightbar
Yes
No
Matrix Headlights
Yes
No*
Glass Roof
Yes
No
Rear Lightbar
Yes
No
* Everything with an asterisk is currently unconfirmed, but based on other leaks and the Mexican Model 3, we expect these features not to be included or cut down.
More Than a Leak
While the list of removed features is certainly revealing, there is more to this sighting than just a product leak. This is a clear view into Tesla’s new strategy for its next phase of growth. This cut-down Model Y confirms that Tesla is looking for a more pragmatic approach in a time of macroeconomic turbulence, and focusing on doing what it does best — manufacturing.
By leveraging the existing Model Y platform, Tesla can cut down on the immense R&D costs and time-consuming production ramp associated with a brand-new vehicle and new production line. This allows Tesla to use its current manufacturing expertise and supply chains to bring a lower-cost vehicle to market much faster.
This isn’t a new concept for Tesla, as we’ve already seen with the reduced-cost Model 3 variant in Mexico. However, the difference here is that the new Model Y includes many new features — features that could be removed for a more economical version. While we would all have loved to see a new vehicle design from Tesla, their strategy here prioritizes speed and cost-efficiency over building a new vehicle from the ground up. It also capitalizes on the popularity of the Model Y, which was the best-selling vehicle in the world in 2022 and 2023 (and just a few thousand short in 2024).
For potential buyers, there are a lot of trade-offs here. The lure of a Tesla vehicle for potentially $34,990 without any federal incentives is tempting, but it comes at the cost of many features that have come to define Tesla’s “premium at any price” branding and experience.
The most iconic loss here is the all-glass roof, which has become a signature of Tesla vehicles for years, alongside the much-simplified cabin. There will definitely be creature-comfort compromises here, but in terms of functionality, this is still a Model Y in terms of size and spaciousness.
Ultimately, this affordable variant will create a new entry point for many into the Tesla ecosystem, but also force an interesting choice on consumers. Is it worth buying the affordable variant, or would you prefer to wait a couple of years to get the vehicle you really want, complete with all the extra amenities?
For many looking to get into a Tesla sooner, the value proposition of this affordable variant will be hard to ignore.
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During a major update presented during the Q2 2025 Earnings Call, Tesla confirmed that its plans for a new, more affordable vehicle are finally on track for sales to begin later this year. Tesla originally stated that production for the more affordable model would begin by the end of the first half of 2025, and they’re technically correct - they’ve begun production, but sales will not begin until late 2025.
Tesla is targeting a production ramp-up throughout Q3 2025, with the vehicle officially going on sale sometime in Q4 2025. To achieve this timeline, Tesla is sticking with what we’ve previously heard about the affordable model. It will likely be a simplified, cut-down version of the ever-popular Model Y, rather than a vehicle built from the ground up on a new platform.
Slower Ramp, Later Launch
While the news of a 2025 launch is exciting, Tesla has cautioned that the production ramp will be slower than initially expected. With the ramp beginning in Q3, Tesla has attributed the slower pace to two key factors: the recent cut of the EV tax credit in the US, and an internal focus on factory retooling.
Let’s break that down. In response to the recent tax credit cut, Tesla has focused its efforts on producing as many of its current vehicles as possible, allowing customers in the United States to purchase vehicles while the tax credit is still active. In order to double down on this, Tesla is running their largest batch of promotions in North America that we’ve ever seen - with a promotion on nearly everything but the new Model S and Model X.
Because of this, their manufacturing lines at Fremont and Giga Texas are running full speed, not allowing time for the retooling needed to produce the affordable model. The affordable model appears to be based on the same platform as the Model 3 and Model Y, as Tesla plans to utilize its existing production facilities to produce the new model.
So, in the simplest of terms, Tesla has been too busy producing vehicles on the very same factory lines that will eventually produce the affordable model. Now, as we enter Q3, Tesla expects to slow down that pace to allow for factory retooling and ramping for the affordable model, for a sales launch in late 2025.
E41: A Pared-Down Model Y
Based on comments from Elon and the team at the Earnings Call, the affordable model will almost certainly be a more cost-effective version based on the existing and proven Model Y. We’ve previously heard rumors about project E41 from China, which told us about a feature-cut Model Y that would come in with a 20% reduction in costs.
The E41 is expected to feature textile seats, similar to those of the cut-down Model 3 for Mexico, while also likely reducing features such as heated and cooled seats, ambient lighting, the rear screen, acoustic glass, and speakers. At the end of the day, E41 isn’t the next-gen, affordable model on a bespoke platform that many have been waiting for—the Tesla Compact. Instead, it’s a simplified and pared-down Model Y that is more affordable for a wider range of potential buyers.
This reduced complexity allows Tesla to bring a lower-cost vehicle to market much more quickly. It is a pragmatic decision that prioritizes getting an affordable, FSD-capable EV into customers' hands sooner. This lets Tesla adapt to current market and economic realities, rather than waiting for a revolutionary but more complex-to-manufacture new platform.
Will There Be a Next-Gen Model?
Tesla still has several plans for new battery cell types and new drivetrains in their plans for 2026 and 2027. In addition, with the new LFP battery production plant in the United States beginning to scale up, there is a good chance that Tesla is still hard at work in their secretive design studio on a newer, smaller, and even more affordable model.
We believe that Tesla still intends to produce a new, smaller model, but given today’s market realities, it doesn’t make sense to introduce an extremely low-margin model into the lineup. This is especially true when new car sales are suffering due to economic uncertainties and tariff obligations are changing daily.
The Next Steps
Now, with what is likely the E41 beginning production ramps at Fremont and Giga Texas, we’ll have to wait to see exactly what Tesla has done to cut down on the Model Y and what they manage to cut the price down to.
With the Model Y RWD coming in at $44,990, a 20% price cut would bring it down to about $35,990 (before incentives), making it by far Tesla’s cheapest EV. That makes it remarkably more affordable, especially for those who still have remaining state incentives in place. By some miracle, if Tesla can bring that price down to $29,990, it may become the best-selling budget vehicle we’ve ever seen. We don’t expect such a drastic price cut until at least the introduction of the next-generation model, though.
We’ll be keeping a close eye on what Tesla does, as if they’re actually producing these vehicles now, it shouldn’t be long before we’re able to spot them.
It’s happening… According to an internal memo viewed by Business Insider, Tesla is expanding its Robotaxi Network to a new city. This expansion will take place in the San Francisco Bay Area and marks the first Robotaxi expansion.
According to Business Insider, this timeline was accelerated following the success of Robotaxi in Austin. Following a discussion with our own source, the rollout is expected to begin on Sunday morning. Interestingly, this timeline lines right up with the conclusion of the X Takeover event in San Mateo, which several Tesla executives are likely attending.
This launch will mark the second city for Tesla’s ride-hailing service, following its debut in Austin. As with Austin, the service will be invite-only for some Tesla owners, who will be able to hail and pay for rides via the Robotaxi app.
What to Expect
For this initial deployment, the Robotaxis will still be deployed with a human safety monitor, but with a catch. Unlike the Austin deployment, where the monitor sits in the passenger seat, the Bay Area monitors will be in the driver’s seat. This is a critical distinction, and for all intents and purposes, a safety driver. This is due to regulatory reasons, which we’ll dive into.
The service will operate within a geofenced area covering a wide swath of the Bay Area. The memo mentions that the area should cover Marin, San Jose, and much of the East Bay area. Tesla will once again be using the modified Model Ys it uses for the Austin Robotaxi Network - equipped with a second telecommunications unit.
We’re expecting Tesla to send out a round of invites in the coming days for owners local to the Bay Area.
Regulatory Grey Area
While the launch is a landmark moment for Tesla, there’s an interesting story behind just how they’re navigating the rollout of Robotaxi, given California’s complex regulatory environment. The presence of a safety monitor in the driver’s seat isn’t a precaution - it is exactly the way Tesla intends to push the deployment until formal federal regulations supersede municipal and state regulations on autonomous vehicles.
According to the California DMV, Tesla has a permit for testing FSD with a safety driver, but has not yet secured a permit for driverless testing or deployment. The California Public Utilities Commission (CPUC), which regulates ride-hailing services, has also not received an application from Tesla for a commercial public service permit as of early July, according to Business Insider.
By keeping a fully capable monitor in the driver’s seat, Tesla appears to be operating in a regulatory grey area. The service could be defined as a “chauffeured ride-hailing service” that uses FSD as an “advanced driver-assist” feature, rather than a fully autonomous service. This allows Tesla to continue operating under its existing testing permits while it continues to work with the DMV and CPUC to obtain approval.
Elon previously mentioned that the Bay Area regulators have been extremely reasonable, so this strategy was likely developed in conjunction with the regulators to start the rollout early and obtain regular permitting as operations continue.
This is definitely a bold first step outside of Austin, and we’re happy to see that Tesla is pushing hard on expanding the Robotaxi Network. This allows Tesla to gather invaluable data on FSD performance in another dense and challenging environment, while also adding more paying customers to its network. Tesla also plans to expand to Florida and Arizona, as well as other US states and cities by the end of 2025, so there will definitely be more to come.
