Tesla Tests Budget Model Y Variants Ahead 2026 Launch

Tesla is preparing to launch a more affordable variant of its Model Y electric SUV, expected around 2026, with a starting price near $40,000, down from the current $45,000. This "lite" Model Y has been spotted testing near Tesla's Gigafactory in Texas, revealing cost-cutting measures such as simpler styling, removal of several premium features, smaller wheels, and possibly a lithium-iron-phosphate battery to maintain reasonable range while reducing expenses. Meanwhile, Tesla is also refreshing the Model Y Performance version for December 2025 delivery, featuring significant upgrades including bi-directional charging, enhanced suspension, exclusive wheels, sportier styling, and interior enhancements like a larger 16-inch center screen and adaptive damping. The Performance model offers competitive power and range specifications compared to rivals like the Hyundai Ioniq 5 N and Chevrolet Blazer EV SS, balancing performance and price. These moves come amid increasing competition in the affordable electric SUV segment, where Tesla aims to maintain market share against rising global competition, including from Chinese EV manufacturers. Volvo is also entering this space with its all-new EX60 mid-size electric SUV, set for a mid-2026 launch in Australia, targeting the family SUV market and competing with models like Tesla's Model Y.